General Insurance In Romania Least Profitable In CEE – Insurers

He said civil liability insurance RCA and voluntary car insurance CASCO policies have registered very high combined ratios.

The combined ratio is comprised of the claims ratio and the expense ratio. The combined ratio is calculated by taking the sum of incurred losses and expenses and then dividing them by earned premium. A ratio below 100% indicates that the company is making underwriting profit, while a ratio above 100% means that it is paying out more money in claims that it is receiving from premiums.

„Profit margins for other insurance policies that were historically profitable, such as casualty and property insurance, have been drastically reduced following the tendency to increase volumes for this type of insurance to try and make up for losses on the auto insurance segment,” Constantinescu said during a seminar.

Constantinescu said the combined ratio of the local general insurance market was of 127% in 2008, compared to 96% in neighboring Bulgaria. In other words, insurers pay claims of 127 lei (EUR1=RON4.1049) per RON100 worth of premiums underwritten on the general insurance segment.

He added the insurance market is at a deadlock as, unlike in previous years, profitability continues to decrease and insurers lack opportunities to increase their volumes.

At the end of 2009, revenues from underwritten auto insurance premiums accounted for 77% of the general insurance market, from 67% in 2006.

„After years of double-digit growth on the auto insurance market, revenues from this type of insurance stagnated in 2009. I don’t think we have anything to be optimistic about for 2010 either and we will probably see a slight decrease in auto insurance underwritings,” Constantinescu said.