Insurance regulator says that mandatory home insurance will come into effect on July 1st

The law of mandatory insurance will become operational on July 1st, as initially scheduled, and right now the Insurance Supervision Commission (CSA) is working on preparing the norms it is expected to elaborate, CSA chairman Angela Toncescu stated yesterday.

Last week, CSA announced that the law for mandatory home insurance might be postponed. "Under the circumstances, being the initiator of the project, MAI (the Ministry of Internal Affairs and Administration ed. note), together with the CSA are considering submitting a proposal for postponing date the aforementioned law will come into effect, until a later date that will be set by the competent authorities", the press release said.

Yesterday, at a press conference, the head of the CSA said, that the insurance regulating body is preparing the norms that it is expected to elaborate. "We must create the Pool and we are waiting on the insurance companies to determine how much each insurance company will contribute in order to participate in the creation of this Pool", Toncescu said.

She added that around 20 insurers want to participate in this Pool. "MAI requested postponing (applying the provisions of the law ed. note) because the local administrations are not ready yet. I am convinced that this law will come into force on schedule. From the CSA"s point of view, there is no problem", Toncescu said.

The communiqué issued last week by the CSA mentioned that "the elaboration of the technical norms isn"t enough for the application of the provisions of the law no. 260/2008 on the mandatory insurance of homes against earthquakes, landslides or floods. It is also necessary to improve the mechanism needed by the local authorities to insure a cohesive and continuous information stream which implies the amendment of the current legislation ".

• Allianz-Ţiriac: The law for mandatory insurance is inapplicable

The general director of Allianz-Ţiriac Asigurări, Cristian Constantinescu, believes that "the law for mandatory insurance of homes is clearly inapplicable" and "it is impossible for it to come into effect on July 1st ".

Constantinescu, who is also a president of the National Union of Romanian Insurance Companies, (UNSAR), explained that insurers issue policies for covering natural disaster risks based on the law no. 268/2008, and in case damage occurs, it has to be covered by the issuer of the policy, which would then recover its payment from PAID.

Constantinescu said that in order to cover these damages, the insurer must create reserves, which requires additional funds.

According to a project which is currently under public debate at the CSA, the share capital of the Insurance Pool against Disasters (PAID) will be at least 12 million Euros.

However, the president of the UNSAR says that PAID should have a share capital of 25-30 million Euros, "because it s a Pool for disasters".

"The great advantage of companies participating in the Pool, would be the cross-selling, but we don"t know to what extent this benefit can be capitalized on", Constantinescu said.

According to the law, the maximum contribution of each insurer in PAID can not exceed 15% of the total share capital. Only insurers which are authorized to underwrite natural disaster risk and whose license has not been suspended or whose operation has been forbidden or restricted in the last two years will be allowed to join the Pool.

The maximum insured amount is 20000 Euros for type A homes and 10000 Euros for type B homes. The mandatory premium is 20 Euros for type A homes and 10 euros for type B homes.

Homeowners who do not ensure their homes run the risk of paying a fine between 100 and 500 lei, with the verification and sanctioning of misdemeanors to be done by mayors and personnel certified for this purpose.

Of the fines set according to the law and levied by the CSA, 40% will go to the state budget, 40 to the CSA - 40%, and the remaining 20% will go to the budget of the local authorities that the person in question answers to.