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Romanian Mandatory Home Insurance Law To Be Enforced As Of July 1

The law regarding mandatory home insurance will come into force on July 1, as it was first established, Angela Toncescu, the president of the Romanian Insurance Supervision Commission, said Tuesday.
Romanian Mandatory Home Insurance Law To Be Enforced As Of July 1
10 mart. 2009, 14:02, English

Last week, the insurance regulator issued a press release saying it would require a postponement on the enforcement of the law.

Enforcing Law 260/2008 regarding mandatory home insurance against earthquakes, landslides or floods entails, beside the drafting of technical norms, the improvement of mechanisms authorities need to ensure a coherent and continuous flow of information which, in turn, entails changes in legislation, the insurance regulator said in the press release.

Early November 2008, Romanian President Traian Basescu passed the law regulating mandatory home insurance. Under the law, home owners are obliged to get insurance policies and pay premiums ranging from EUR10 to EUR20, insuring homes for EUR10,000 to EUR20,000.

The law also sets up an insurance pool (PAID), created through the association of insurance companies authorized to conclude home insurance contracts. Toncescu said that around 20 firms have agreed to take part in setting up PAID.

On the other hand, Allianz-Tiriac Asigurari general manager Cristian Constantinescu stated that Law 260/2008 is “a dead project”, which cannot be applied in its current state.

“The theoretical agreement on PAID participation has come from company executives, but it must be preceded by an agreement from the shareholders,” Constantinescu said, adding that given the law’s current state, no shareholder "in his right mind" would allot the money to become a PAID shareholder, because there is no way to know when the investment will be recovered.

“Furthermore, the policies covering disasters as per Law 268/2008 are issued by the insurers, and if there are damages to be paid, they will have to pay and then recover their money from PAID. But, in order to cover the damages, they need to have reserves, which means more money,” Constantinescu said.

There are currently eight million homes in Romania, of which only 8% are insured, according to the regulator’s data.

According to an estimate of the Interior Ministry, underwritten home insurance premiums will reach EUR150 million when the law is enforced.