The insurance companies in the next five years will be obliged to enter a race against the clock and comply with the legislation. It seems that some of them will not get to the finish. At least nine of the insurance companies ultimately managed to get the consent of the National Commission on Financial Markets (CNPF) to raise the authorized capital up to the minimum limit of 4 million lei, while another five companies are waiting for a sentence as the Board of the CNPF notified the Licensing Chamber of the fact that they did not comply with the legislation. The Chamber is to initiate the procedure for withdrawing their activity licenses. Two or three of these companies are doomed to failure. The companies were to increase their authorized capital to 4 million lei within 12 months of the entrance into force of the law on insurance. The deadline expired on April 7, 2008. Thirty-three insurance companies worked in 2007. Though many of the insurance companies are weak, they begin to strengthen their positions and their assets rise constantly, doubling in value during the last three years. The total assets rose from 445 million lei in 2004, to 841.2 million lei in 2006 and to over 1 billion lei in 2007 in the wake of a slower growth of the paid registered capital, up to 207 million lei. Last yearend, only 15 companies of the 33 had a capital that exceeded 4 million lei. New players appeared and the shareholders changed. The net assets increased (+23.09% in 2007) and reached 364.87 million lei, but 85.5% of them were owned by 15 of the 33 companies. It seems that the insurance market follow the path of the banking system, which led to the bankruptcy of a number of banks during the consolidation process that lasted for about ten years. Their liquidation as a result of insolvency hit first of all the depositors, who still wait to get back their money after the central bank decided to withdraw the licenses of these financial institutions many years ago. [More “victims” will follow after the first] The procedure for withdrawing the licenses of the five companies that are in the center of the CNPF’s attention will last. It is not excluded that some of them will win in court and will continue working. One thing is for sure – there will be new cases after the licenses of the given companies are withdrawn. Within five years, the insurance companies will be obliged to increase their capital about seven times compared with the period before the law on the insurance took effect. The minimum limit of the authorized capital on April 7, 2009 will be 6 million lei, in 2010 - 9 million lei, in 2011 - 12 million lei, while after April 7, 2012 - 15 million lei. The insurance companies dealing with life insurance will be forced to increase their capital to 22.5 million lei, while the reinsurance companies – up to 30 million lei. Some of the companies with a capital of 4 million lei reached this level only recently so that it would be very difficult for them to raise the capital. Experts say that 22-25 companies will remain on the market after 2007, but the quality of the services will improve. [What will be the effects of the rise in capital?] Given that the capital of the insurance companies as financial institutions is very small, the new requirements regarding the capital will lead to the consolidation of the market, considers Eugen Slopac, the manger general of ASITO company. “There are great prospects and an unused potential for the insurance business. The new norms will be a serious argument for increasing the flow of investments into Moldova”. "The insurance companies will become stronger from financial viewpoint. Secondly, all the market participants will have possibilities of developing,” experts consider. They say that the requirements to increase the authorized capital will contribute to a higher interest in Moldova’s insurance market on the part of important foreign investors. The number of rivals will decrease. [What will happen to the “bankrupt” companies?] This year already, some of the insurance companies will have to change their activity or the owner, if their will be offers from foreign companies. It is more convenient to purchase an active company, event with a small capital, and to profit from the five-year period to increase the capital, rather than to found a new company with an obligatory capital of 15 million lei. After the previous rise in the limit of the authorized capital from 300,000 lei to 2 million lei, ten of the 43 companies that were in the Register of Insurers in 2003 disappeared from the market. There were 38 insurance companies on the market in 2004, but their number decreased to 33 by the end of 2006. [What will happen to the clients?] “The insurance companies have enough reserves and capital to honor their obligations towards the clients,” say managers of companies with strong positions on the market. “The situation that was eight-ten years ago cannot repeat. Thousands of depositors lost their money when a number of banks went bankrupt then. The risks in the insurance business are smaller,” the insurers say. At yearend 2007, the insurance companies owned reserves and insurance funds of 442.5 million lei, about twofold more than the sum of paid damages. [On the last position in Europe] Moldova takes the last position in Europe by the shares of the insurances in the GDP and premiums per capita, according to a study carried out by the Association of Actuaries of Moldova at the end of 2007. According to the Association, the insurance costs in 2006 made up about 1.5% of the total costs of a person, as against the European average of 6.5%. The insurance density (insurance premiums per capita) in 2007 was 12.18 euros, an increase of 32.8% year on year. According to the journal “Financial Standard”, the insurance penetration in Moldova is similar to that in Romania, but the insurance density is eight times lower than in Romania, 30 times lower than in Hungary and 160 times lower than in Belgium. The reduced value of this indicator is determined mainly by the living standards of the population. Exerts say that the exponential rise in incomes from insurance premiums during 2000-2007 was determined by the consolidation of the insurance market, following tougher requirements regarding the authorized capital and the enhanced competitiveness of the insurance market by quality. . The continuous rise in capital will lead to a further strengthening of the market and to enhanced competitiveness and efficiency of the market in the end.