ASSESSMENT OF THE ROMANIAN INSURANCE MARKET PRE- … · 2018. 9. 27. · Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Issue 4/2018 „ACADEMICA

Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Issue 4/2018

„ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007

ASSESSMENT OF THE ROMANIAN INSURANCE MARKET PRE- AND POST-CRISIS

BILEVSKY GABRIELA

PHD. STUDENT, INSTITUTE FOR ECONOMIC FORECASTING-NIER,

ROMANIAN ACADEMY, BUCHAREST, ROMANIA,

e-mail: [email protected]

Abstract

This study highlights the developments of the main indicators specific to the insurance market (insurance

penetration degree, gross written premiums, gross claims paid, loss rating, insurance density, market concentration

degree) during 2007-2017. In order to have an overview of the Romanian insurance market, we also carried out an

analysis of the hierarchy of market leaders from 2017 compared to 2009. The year 2009 was selected for this

comparison in order to capture the magnitude of market transformations, as this was the year when the consequences

of the economic crisis were felt, and also the year when the gross premiums written in Romania dropped for the first

time.

The economic and financial crisis in 2008 created changes in the hierarchy of the top 10 companies, some of

those with a significant share in the previous period (for instance, ASTRA with 9,13%) entering bankruptcy, others

opting for mergers (ING, BCR Asigurări). At the end of the analyzed period, in 2017, the post-crisis recovery of the

insurance market led to a stronger concentration.

Keywords: Insurance market, Romania, market leaders, insurance indicators

Clasificare JEL: G19, G20, G22, G28

1. Introduction

The insurance market is divided, in principle, into two major categories of insurance: general

insurance and life insurance. The assessment of the insurance market [1]-[3] is based on the

analysis of specific indicators, which provide information on the degree of insurance penetration,

gross written premiums, gross claims paid, loss rating, insurance density, market concentration.

The Romanian insurance market is regulated by law [4]. The global economic and financial

crisis of 2008, different from most of the other countries, was felt in the Romanian non-banking

financial system starting with 2009. The assessment of the pre- and post-crisis behavior of the

Romanian insurance market can be done by analyzing the evolution of specific indicators for the

2007-2017 period; 2007 is the year of Romania's accession to the European Union (January 1). This

article presents an overview of the Romanian insurance market and the evolution of its leaders. The

data used in this analysis comes from the Annual Reports of the Insurance Supervisory

Commission and after 2013, from the Annual Reports of the Romanian Financial Supervisory

Authority.

The article is further organized as follows: the next six sections present the individual

analysis for each of the above mentioned indicators. Section 8 makes a comparative analysis of the

rank of market leaders, and the last section presents a series of conclusions.

2. Insurance penetration degree

The insurance-specific indicator reflecting the position of the growth rate of income from

gross written premiums compared to the growth rate of the GDP is called the insurance penetration

degree. This macroeconomic indicator of the insurance market is expressed as a ratio between gross

written premiums and the Gross Domestic Product (GDP).

In 2007 and 2008, the insurance penetration degree was 1.77%, the highest for the entire

studied period (Figure 1). In 2009, it dropped to 1.74%, and after 2010 had a downward trend

reaching 1.21% in 2017. However, in 2012, there was a revival to 1.41% over the previous year,

closely related to the fact that the gross written premiums increased by 5.56% in 2012 compared to

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the previous year. These levels are extremely low, indicating an insurance market undergoing basic

development considering the population and economic agents’ lack of education regarding

individual protection against risks inherent to daily activities and natural hazards [7]-[13].

The average insurance penetration degree in the European Union was 7.19% in 2016, with

Romania ranking among the last, with one of the lowest penetration rates (1.21%), on a par with

Lithuania. At the same time, developed countries in the EU have the highest penetration degree,

with Denmark followed by the UK having values well above average, followed by France and

Germany [14].

1.77

1.77

1.74

1.56

1.38

1.41

1.271.21

1.23

1.25

1.21

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

%

Figure 1. Insurance penetration degree on the Romanian insurance market 2007-2017 (%)

3. Gross written premiums (GWPs)

One of the most important indicators of the insurance market is the gross income registered

by insurance companies after the conclusion of the contracts and which is represented by gross

written premiums.

The insurance activity carried out after Romania's accession to the EU experienced a sharp

fluctuation, materialized in the increase or decrease of the income from gross written premiums

(GWP). In 2007 and 2008, the nominal growth was more than 25% as showed in Table No. 1.

Table No. 1. Evolution of gross written premiums in the total market

over the period 2007-2017

Year

Gross Written

Premiums Dynamic

(year-to-year %)

Total weight of the

GWP from general

(non-life) insurance

(%)

Total weight of the

GWP from life

insurance (%)

2007 25,25 79,4 20,9

2008 24,23 79,5 20,9

2009 -0,74 81,6 18,4

2010 -6,36 79,9 20,1

2011 -5,82 77,8 22,2

2012 5,56 78,2 21,8

2013 -1,60 79,9 20,1

2014 -0,48 79,7 20,3

2015 7,60 79,3 20,7

2016 16,09 79,2 20,8

2017 3,96 76,2 23,8

22



These two years show the largest year-to-year growth in the studied period, something which does

not happen in the following years.

In 2007-2017, the share of non-life insurance in total insurance ranged from a maximum of

81.6% in 2009 to a minimum of 76.2% in 2017, while the share of life insurance varied between

18.4% (a minimum reached in 2009) and 23.8%, a maximum reached in 2017.

During 2009, the effects of the economic crisis were also felt in the Romanian economy,

including in the non-banking financial sector. These effects influenced the decline in economic

activity, leading to rising unemployment, a reduction of income for the population and a decrease

of purchasing power on the Romanian consumer market. In this context, the insurance market had a

downward trend over the 2009-2014 period, with the exception of 2012. Thus, the first effects of

the economic and financial crisis of 2008 materialized in a 0.74% decrease in income from gross

written premiums in 2009 compared to the previous year, their value reaching Ron 8.9 million in

nominal terms. Since 2015, there has been an upward trend in gross written premiums in the total

insurance market, with nominal values rising from Ron 8.7 billion in 2015 to Ron 10.5 billion in

2017 (3.96% as compared to 2016), the highest increase taking place in 2016 (16.09% compared to

2015) (Table No. 1) [7]-[13]. This trend is supported in particular by the continuous growth of

gross written premiums for life insurance, with a consolidation of this segment in 2017, with an

income of up to Ron 2.5 billion, the highest value being registered in the studied period (Figure 2).

Within the country, the highest weight (around 49-50%) is recorded at the regional level in

the Bucharest Ilfov region, with the Northwest and Center (around 7-9%) at a significant distance,

and then followed by the other regions (4-6%). This difference is more pronounced in the life

insurance sector. This trend is common for the years within the studied period, with a geographical

concentration of gross written premiums in the Bucharest-Ilfov Region.

4. Gross claims paid

In 2007, the gross claims paid (compensations) amounted to Ron 3.28 million, accounting for

45.68% of the total gross written premiums. The 33.1% increase in gross claims paid in 2008, the

first year of the crisis, was also due to the 24.8% increase in gross written premiums. The biggest

impact of the crisis on the insurance market was felt in 2009, when the highest nominal value of

gross claims paid in the analyzed period (Ron 5.43 billion) was recorded, 24.6% higher than in

2008, in contradiction with a 0.74% reduction in gross written premiums. 2010 is a point of change

in the growth rate of gross claims paid, which decrease by 6.7%, but gross written premiums also

decrease by 6.36% compared to the previous year (Figure 2). The volume of gross claims paid is

directly proportional to the gross written premiums, because in 2012, when the gross written

premiums increase by 5.56%, the gross claims paid increase by 6% compared to 2011 also - to Ron

4.8 billion. In the following years, gross claims paid have a downward trend, down to Ron 4.5

billion in 2013, remaining at the same level in 2014. In 2015 and 2016 the gross claims paid remain

at the amount of Ron 4.7 billion, but in 2017 they go up by 12.8%, to Ron 5.3 billion, a growth that

is much higher than the 3.9% of gross written premiums [7]-[13].

23



0

2

4

6

8

10

12

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

billion lei RON

Gross written premius Gross claims paid

Figure 2. The comparative evolution of the insurance market income from gross written premiums

and gross claims paid during 2007-2017 (billion Ron)

The largest decrease in gross indemnities is recorded in 2011, 11.6% lower than in 2010,

with a decrease of gross written premiums of only 5.82%, but with a fairly high damage rate –

57.3% - as shown in Figure 2.

5. Loss rating

In the field of general (non-life) insurance, on the Romanian market, motor vehicle insurance

dominates, accounting for about 75% of the gross premiums written in 2017 [13]. Motor vehicle

insurance is represented in the general insurance class A10 (civil liability insurance for the use of

land vehicles) with a 50% share of gross written premiums and a Ron 3.82 billion value, and A3

(land vehicles, excluding railway rolling stock) with a share of 25% of gross premiums written in

non-life insurance and a value of Ron 1.89 billion, an increase of 8% compared to 2016 [6], [7].

Regarding the relationship between the level of tariffs and the loss rating, the evolution

during 2007-2017 was marked both by the effects of the economic and financial crisis in 2008 and

by the new regulations introduced after 2014 (Rules 23/2014 and 39/2016), regarding the obligation

to maintain a proportion between the loss rating and the fees charged. The Milliman consulting firm

was appointed by the Financial Supervisory Authority [12] to conduct an actuarial analysis of the

fees charged by insurance companies authorized to conclude RCA policies (nine out of 31

functional companies in 2017). The results highlighted the existing ratio between the tariff level

and the tax rate. This approach was aimed at maintaining a balance of the RCA market and the

suitability of pricing based on the correlation of average loss rating with the average frequency of

the damage. Thus, during the analyzed period, gross claims paid (compensations) had a similar

trend to gross written premiums (Figure 3).

The loss rating is calculated as ratio between the gross losses occurred and gross premiums

written [12]. As about the loss rating on the overall insurance market between 2007-2017, it rises

from 45.7% (the lowest being in 2007) and reaches 61.3% in the span of two years (in 2009), the

highest loss rating in the period under review, although gross premium collections have been

decreasing since 2009, as can be seen from the data in Figure 3. Subsequently, the loss rate follows

a downward trend to 46.8% in 2016 due to the legislation that proposed measures to diminish this

phenomenon by imposing new conditions (the Bonus-Malus System) for insurance and pricing in

the compulsory motor insurance category (RCA), a segment that decisively influences this

indicator [7]-[13].

24



Figure 3. Evolution of the loss rating on the Romanian insurance market

2007 - 2017 (%)

6. Insurance density

Another indicator specific to the insurance market is the insurance density, which is

calculated by reporting the volume of gross written premiums to the number of inhabitants. During

the studied period there was a major leap, from a density of Ron 332.4 / inhabitant in 2007 to Ron

416 / inhabitant in 2008 and continuing the increase to Ron 435 / inhabitant in 2009, followed by

an accelerated downward trend as can be seen in Figure 4.

Figure 4. Evolution of the density of premiums written on the insurance market in Romania

in the period 2007-2017 (lei / inhabitant)

The major jump in insurance density in 2009 was due to the accelerated growth of gross

written premiums, a development that was generated by the entry of new foreign-owned companies

on the insurance market, the diversification of insurance products by demand, the authorization of

companies that also perform optional pension fund activities (and which positively influence the

life insurance activity), the use of modern distribution channels, as well as the general conditions of

economic growth from 2008.

There is some balance in this indicator in the years 2012-2014, around Ron 410 / inhabitant,

followed by a continuous increase to Ron 528 / inhabitant in 2017, by Ron 118 / inhabitant, the

highest insurance density on the Romanian insurance market. This is due to the nominal increase in

gross written premiums, which reached the highest recorded value so far, of Ron 10.5 billion in

2017 [7]-[13].

45.748.8

61.3 61.0

57.3 57.6 55.9 55.4 54.0

46.850.5

0

10

20

30

40

50

60

70

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

%

25



7. Concentration degree of the insurance market

Throughout the studied period, starting with 2007, there has been a phenomenon of market

concentration, with 10 companies controlling about 80% of the volume of transactions in the

insurance market for general and life insurance policies, as can be seen in Figure 5. In 2008 was the

highest concentration degree (93.74%), and in 2009 the lowest degree of concentration (77.96%),

as a result of the signals from the international insurance market in the context of the 2008

economic crisis.

The Concentration degree of the insurance market indicator registered in 2016 an increase of

up to 87.44% and in 2017 of up to 88.73%, as can be seen in Figure 5. This increase is due to the

acceleration in the volume of gross written premiums for the first 10 ranked companies, to the

detriment of others on the market.

0% 20% 40% 60% 80% 100%

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

81.77

93.74

77.96

79.17

87.09

79.71

80.5

79.4

79.25

87.44

88.73

The first 10companies

Other

Figure 5. Degree of concentration of the insurance market for GWP in the period 2007-2017

8. Comparative analysis of market leader rankings

On the basis of the comparative ranking analysis of the first 10 insurance companies

regarding the market share of income from gross written premiums, reported for 2017, we can see

various shifts between companies and even disappearances compared to 2009 (Table No. 2).

Year 2009 was chosen for this comparison in order to capture the magnitude of the changes

on the market, as it is the year when the consequences of the economic crisis were felt, and it is the

year when the gross written premiums dropped in Romania for the first time.

In 2017, CITY INSURANCE is ranked as a market leader with a share of 12.93% of the total

insurance market, while in 2009 it was not even in the top 10, coming from the 6th

place in 2016.

On the other hand, ALLIANZ ŢIRIAC ranked second in 2017 with a 12.66% share, having

lost its market leader position held in 2009, with a difference of 0.27 percentage points.

EUROINS ROMANIA ranks 3rd

with a share of 11.20% in 2017, being in a similar situation to

CITY INSURANCE: not even being in the top 10 in 2009, but coming strongly from the 5th

place in

2016, from a market share of 10.23%. These two new companies entering the top 10 replaced

ASTRA and ARDAF, which were removed from 2017’s top 10.

ASTRA ranked third in 2009, but its operating license was withdrawn in 2016, being

declared bankrupt, while ARDAF, on the 10th

place in 2009 with a market share of 3.69%,

continues to exist under the same name.

26



Table No. 2. Comparative analysis of the first 10 companies in the insurance market in 2009 and

2017

2009 2017

Market share rank

compared to

2017

Insurance company Market

share %

Insurance company Market share

% 2009 2017

ALLIANZ-ȚIRIAC 14,50 CITY INSURANCE 12,93 - 1

OMNIASIG VIG 12,56 ALLIANZ-ȚIRIAC 12,66 1 2

ASTRA 9,13 EUROINS ROMÂNIA 11,20 - 3

ASIROM VIG 7,28 OMNIASIG 10,91 2 4

BCR ASIGURĂRI 6,49 ASIROM 9,96 4 5

GROUPAMA 6,05 GROUPAMA 9,52 6 6

ING ASIGURARI SA 5,94 NN (din ING) 7,59 7 7

GENERALI 5,72 GENERALI 6,32 8 8

UNIQA 5,60 UNIQA 4,00 9 9

ARDAF 3,69 BCR ASIGURĂRI 3,64 5 10

The first 10 companies 76,96 The first 10 companies 88,73

Other 23,04 Other 11,27

TOTAL

Insurance Market 100,00

TOTAL

Insurance Market 100,00

Ranking 4th in 2017 is OMNIASIG, with a market share of 10.91%, dropping from the

second place in 2009. Another massive mutation is BCR ASIGURĂRI VIG, which comes down

from the 4th

place in 2009, with a market share of 6.49%, to the 10th

place in 2017, with a market

share of 3.64%.

The takeover of the ING Insurance Company by NN Group in 2015 gave it a steady position

on the 7th

place in the two years under comparison. The other companies (Groupama, Generali, and

Uniqa) kept in 2017 their 2009 ranks, with a steady activity.

9. Conclusions

The dynamics of economic life shown by the increase in the number of movable and real

estate, international trade exchanges and transactions of various values led to a positive evolution

of the insurance and reinsurance market.

The insurance market is continuously developing, the penetration rate of insurance,

determined as a ratio between the sum of the gross written premiums and the gross domestic

product indicating a level of 7.16% in the European Union and only 1.21% in Romania in 2017,

which shows that the Romanian insurance market is quite small compared to other states due to

population’s low degree of economic knowledge paired with low income.

The insurance density in Romania experienced an upward trend in 2007-2009, with a Ron

435/inhabitant peak in 2009 followed by a decrease to Ron 388/inhabitant in 2011. The upward

trend resumed again in the following period, so that in 2017 it reached Ron 528/inhabitant amid the

accelerated growth of gross written premiums, the diversification of insurance products and the

entry of new companies on the market.

However, the concentration of the Romanian insurance market is significant, given that 10

insurance companies hold about 90% of the insurance market.

27



10. Bibliography

[1] Alexandru F., Armeanu D., Asigurări de bunuri și persoane, Editura Economică, București,

2007;

[2] Ciurel, V., Asigurări şi reasigurări: abordări teoretice şi practici internaţionale, Editura ALL

BECK, Bucureşti, 2000;

[3] Teodorescu S., Fundamentele asigurărilor, Editura Bren, București, 2010;

[4] https://asfromania.ro/en/legislation/asf-legislation/2307-law-no-113-2013, Law No.

113/2013 for the approval of Government Emergency Ordinance No. 93/2012 on the establishment,

organization and operation of the Financial Supervisory Authority;

[5] https://asfromania.ro/en/legislation/sectorial-legislation/insurance-reinsurance-

market/secondary-legislation-csa/rules-csa/3342-rule-no-23-2014-on-compulsory-insurance-

against-civil-liability-for-prejudices-caused-by-vehicle-accidents, RULE No. 23/ 2014 on

compulsory insurance against civil liability for prejudices caused by vehicle accidents;

[6] https://asfromania.ro/en/legislation/sectorial-legislation/insurance-reinsurance-

market/secondary-legislation-csa/rules-csa/5663-rule-no-39-2016-on-the-civil-liability-insurance-

in-romania, RULE No. 39/2016 on the Civil Liability Insurance in Romania;

[7] https://asfromania.ro/publicatii/rapoarte-anuale, Comisia de Supraveghere a Asigurărilor,

Raport asupra pieței de asigurări și a activității desfășurate în anul 2008, 2009, 2010, 2011;

[8] https://asfromania.ro/en/publications/annual-report/asf-annual-report/2327-asf-annual-

report-2012, ASF Annual Report 2012;







[12] https://asfromania.ro/en/publications/annual-report/asf-annual-report, ASF Annual Report

2016;

[13] https://asfromania.ro/informatii-publice/media/arhiva/6310-evolutia-pietei-asigurarilor-in-

anul-2017, ASF Annual Report 2017;

[14] https://www.insuranceeurope.eu/european-insurance-figures-2016-data, Insurance Europe,

28 February 2018, pp.15.

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Documents

ASSESSMENT OF THE ROMANIAN INSURANCE MARKET PRE- … · 2018. 9. 27. · Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Issue 4/2018 „ACADEMICA