Insurance companies need capital contributions of 250-300 million euros from shareholders this year to be able to survive on the market, says Cristian Constantinescu, chairman of the National Union of Insurance Companies in Romania (UNSAR) and chief executive of Allianz-Tiriac, the leader of the insurance market.
"For companies to remain within the legal bounds for the solvency margin (an indicator that gauges the capability to settle the claims due to clients i.e.), 250-300 million euros are needed from shareholders. The essential question is: will this money come in Romania? I seriously doubt it. The money is getting fewer and more expensive," said Constantinescu, 58, who is one of the high-profile managers in insurance.
Insurance companies’ shareholders have been pumping hundreds of millions of euros into the market over the last few years, which they do not know when they will get back, as many companies continue to post significant losses.
"Total capital increases amounted to 998 million RON (271 million euros) last year. There are no companies on the market whose margin is very close to becoming too low," stated Angela Toncescu, chairperson of the Insurance Supervision Commission.
Allianz-Tiriac’s boss expects insurers to end 2008 with over 100 million euros in net losses from the insurance business, which would be a 30% increase compared with 2007 and the third year of losses in a row for the market.
"I expect heavier losses than in 2007. If the reserves that insurers have to set aside are correctly calculated, losses will stand at at least 100 million euros. If shareholders do not come up with money, we may also see bankruptcies," he explains.
The year 2009, Constantinescu says, will be the moment of truth for many insurance companies, because many of them have relied on the increase of revenues to be able to settle their cl
