New draft law on insurances aims to seriously change the field

[Info-Prim Neo Analysis] The participants to the Moldovan insurance market welcome the new draft law on insurances, approved by the Government a week ago and submitted to the Parliament for examination. According to them, the project will make serious changes in the area, as the existent legislative framework is obsolete. The current law on insurances was approved in 1993, so a new law was needed for a long time in order to adjust the legislation to the existent realities, to the new Civil Code and for ensuring a more precise regulation of the current relationships between insured and insurers. The deputy Manager General of QBE ASITO SA Company, Mihai Busuleac declared for Info-Prim Neo that he especially appreciates establishing a minimum quantum of the social capital which is essentially increased for insurance companies. He considers it is a necessity confirmed by the previous practice. The Law from 1993 stipulated initially that the insurance companies must have a social capital of 300 thousand lei and the changes operated in 2005 imposed a capital of 2 million lei. Even if this quote is also extremely small for a company which insures thousands of persons and which must honor its obligations while paying enormous damage compensations, the 2005 provision had benefic effects, inclusively by reducing the number of companies on the market. At present 30 insurance companies are working. This number is still exaggerated for a country like Moldova. “Several times bigger countries have less insurance companies than Moldova” said the quoted source. Mihai Busuleac considers that once the new law will be implemented the insurance market will become more ordered: the companies which will not be able to increase the social capital will disappear; others will unite and become stronger. In order to work successfully on the insurance market, the companies must have an informational system covering all the country and also must have a selling network in all the districts of Moldova and a sufficient financial potential in order to honor their obligations, said Busuleac. The manager of the juridical department of the same company, Victor Cretu declared that the Moldovan insurance market is a total mess: the clients are unpleased, the companies do not know what to do, the cases in court are examined very hard, some stipulations of the normative acts in force which are not conforming to the Civil Code are being mistreated. The lack of a proper legislative framework generates different conflict situations: the volume of the damage compensations is not pleasing the clients, they having sometimes unjustified demands; the law is misinterpreted or interpreted differently. Sometimes the courts can not decide over a case because the norms which should stipulate how to act in different situation are missing. Victor Cretu considers as benefic the fact that the new draft law stipulates a single juridical-organizational form – joint-stock company, which offers multiple guarantees for the persons insured and forces the insurers to prove they are capable of taking risks and responsibilities. The companies which work as Limited Liability Companies or Individual Companies will have to reorganize or will be liquidated. The representative of QBE ASITO SA says that the new law is very precise; it classifies the types of insurances and activities, the license-giving and canceling conditions, it stipulates an increased responsibility of the companies for the activity they are performing. Asked about the efficiency of the new draft law, Cretu said that “it is very complicated at present to elaborate an ideal framework, a perfect law”, however, he hopes that a part of the drawbacks will be eliminated during Parliamentary debates. “There are still things which have to be promoted in order to comply with international standards, but which at present are impossible to be carried out because of social or economic reasons”. He is convinced of the fact that this law will represent “a new stage in the development of the insurance market in Moldova”. A grievance of the insurance companies to the Parliament is to examine the new Law together with the Law on obligatory civil insurance, until the end of this session. According to the quoted source, the obligatory insurance of civil responsibility is not settled in any way. By now, this type of insurances were regulated by a Governmental decision, but which was recently considered unconstitutional by the Constitutional Court, reasoning this is an area that should be regulated by a law not by lower level normative acts. Cretu mentioned that at present the draft law regulating the relationships in the area of obligatory insurances of civil responsibility is being elaborated. This law is referring to the majority of citizens, and first of all to the citizens who own “an increased danger source”, as automobiles. It is an insurance used in all the countries where the automobile owners are obliged to insure their responsibility. According to the informative note of the new draft Law, signed by the Minister of Finance, Mihai Pop, “the activity on the insurance markets in the majority of EU and CIS states is allowed only to joint-stock companies insurers. This juridical-organizational form, which is amply regulated by the legislation of the Republic of Moldova, is one of the most perfect association forms, similar to financial institutions. The new Law includes a minimum social capital quantum: 15 million lei for general insurances, 22.5 million lei for life insurances, 30 million lei for the exclusive reinsurance activity. The authors of the project stipulated a transition period of 5 years, during which the participants to the insurance market must comply with the new standards, inclusively to increase gradually the social capital, to separate the activities in categories and to reorganize into joint-stock companies. The authors also consider that the new law will offer the state all the necessary conditions for organizing and implementing an efficient system of supervision and regulation of the insurance market, will allow the access to the insurance market only to professional participants , capable to respect their obligations. The insurer will be forced to have a proper social capital which would guarantee the capacity of satisfying present and further obligations.