The draft legislation was signed by all ministries, added Popescu. Following its approval in tomorrow’s government meeting, the bill is to be passed as an Emergency Ordinance by Parliament. “We estimate that the entire mandatory home insurance system will be operational by mid-2008,” Popescu said.
The legislation stipulates mandatory insurance to cover three natural disaster risks - earthquake, floods and landslides. The bill was drafted following devastating floods in 2005 and 2006, which generated billions of euros in damages. The estimated international market value of transferring the three above-mentioned risks to reinsurance is €3 billion. Romanian authorities are collaborating with an international broker consortium, which is to make offers and premium quotations for reinsurance risks.
According to the draft law, owners are to pay annual premiums worth €10 or €20, depending on the type of construction, for an insured value of €10,000 and €20,000, respectively. The ministry’s calculations show that some €150-160 million are to be collected in insurance premiums.
Funds are to be administered by the Insurance Pool Against Disasters (PAID), which is to function as a company with insurance company shareholders authorized to offer mandatory home insurance policies. Currently, only 10 percent of private homes are insured, as opposed to some 100 percent in Western countries. Some 85 percent of total homes in Romania are owned by individuals.
However, there is a rising trend in optional home insurance, according to the Vice President of the Insurance Supervisory Commission (CSA), Tudor Balta, who said that the main reason for this increase is companies selling mandatory car insurance packages, which include home insurance.
