Romania Enforces Mandatory Home Insurance Law As Of July1, 2010

The law forcing Romanian homeowners to insure their homes against natural disasters will be enforced starting July 1, 2010 and PAID, the company issuing mandatory home insurance policies must be ready by then, PAID chief Constantin Toma said Monday.

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"One of the challenges PAID (the Romanian Insurance Pool against Disasters) will have to deal with is developing an IT system to manage those about 8.5 million contracts. I do not think we have enough time to develop this IT system by January 1, 2010," Toma said Monday during the 2009 Catastrophic Risks Forum - ICAR.

The law regarding mandatory home insurance, adopted in November 2008, was due to be enforced on January 1, 2010, date announced in May by former secretary of state with the Ministry of Interior Radu Stancu. In November 2008, the Ministry of Interior said mandatory home insurance would become effective on July 1, 2009.

"The executive board of PAID must begin negotiations with reinsurers and reinsurance brokers to set the program's reinsurance parameters. The board will also start talks with the Finance Ministry to help financing the reinsurance program," said Toma.

In September, 13 insurers signed the documents establishing PAID, and their contribution to the PAID's share capital was of EUR4.545 million.

Insurers Astra, Clal Romania and Groupama Asigurari have a 15% participation, while ABC Asigurari, Ardaf, Carpatica Asig, Certasig, City Insurance, Credit Europe Asigurari, Euroins (former Asitrans), Generali and Grawe Romania have a 5.5% participation each.

Homeowners will have to get insurance policies and pay premiums ranging from EUR10 to EUR20, insuring homes for EUR10,000 to EUR20,000.

Mandatory home insurance policies will be issued by the Insurance Pool against Disasters, or PAID, a joint stock insurance-reinsurance company that will manage the risk fund meant for paying the damages in case of natural disasters.

According to the law, mandatory home insurance range from EUR10 to EUR20. The insured value will not exceed EUR20,000, and the minimum level will be set at EUR10,000 and failure to insure homes will be fined by 100 to 500 lei (EUR1=RON 4.2776).

According to an estimation of the Ministry of Interior, the value of subscribed premiums after the enforcement of the law regarding mandatory home insurance will reach EUR150 million.

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