The plenary session of the Chamber of Deputies, the decision-making body, will approve this week that seriously injured people or the relatives of people who died in car accidents are covered by the RCA of some bankrupt companies, as well as the former clients of these insurers who denounced their policies and requested restitution the difference in premium to get their money in priority.
Pay RCA damagesPhoto: Roman Romaniuk / Dreamstime.com
In the situation provided for by law, approximately 130,000 payment requests are registered in which approximately 50 million euros are requested, according to HotNews.ro information from the insurance market.
The context is that the Parliament is preparing major changes to the operating law of the Insurance Guarantee Fund (FGA). One of the reasons is that Romania exits the infringement procedure opened by Brussels for the non-transposition into legislation of an EU Directive (2021/2118).
The bill intended to resolve this situation passed the Senate, and on Monday, April 22, the Committees assembled in the Chamber of Deputies (decision-making body) voted on the joint report on this act, and the bill will now be adopted by the Plenary of the Parliament and then sent for promulgation.
What injured parties and creditors will receive priority in the payment of RCA damages
One of the major changes introduced in the Chamber of Deputies is an amendment that stipulates that certain payment requests will be analyzed with priority by the FGA.
The amendment, initiated by deputy Iulius Marian Firczak (Minorities), provides for changes to art. 15 of the law so that they are analyzed with priority:
- a) payment requests made by minor descendants as well as those who are studying until they finish, but without exceeding the age of 26, of people who died in road accidents;
- b) the payment requests of applicants who, following the occurrence of the insured event, have lost all or at least half of their work capacity by referring to the degrees of disability provided by law;
- c) the payment requests made by the petitioners based on the enforceable titles in opposition to the bankrupt insurers, by which the insurer is obliged to pay monthly annuities in their favor;
- d) payment requests regarding the granting of premium refunds.
Contacted by HotNews.ro on Tuesday, deputy Iulius Marian Firczak said that the draft law with this amendment will be adopted in the plenary session of the Parliament next week.
- “The plenary vote was postponed until next week, the reason being that the senators and deputies have to vote on the appointment of the new members of the Competition Council. There are no technical reasons to change this draft law, since the Committees assembled in the Chamber of Deputies, the decision-making body, voted for the joint report”, said deputy Iulius Firczak.
If it is adopted, the law goes to President Iohannis for promulgation.
What FGA data shows: How many payment claims could be paid with priority
HotNews.ro asked the FGA to detail how many payment requests could be targeted by the aforementioned legislative changes and the estimated value of the compensations that will be paid.
- “On 31.03.2024, a number of 315,000 payment requests were registered and unresolved at the Fund.
- Of these, a percentage of approximately 42% represents payment requests for premium restitution and a percentage of approximately 2.8% represents payment requests for cases of bodily injury and death, including requests for the granting of periodic annuities/benefits”, he stated FGA.
However, the fund specifies that “not all payment requests received for cases of bodily injury and death fall into the limited categories provided by the draft law, but approximately a quarter of them. The computer application used by the Fund does not allow the extraction of information at the level of detail requested, but this will be adapted to the extent that such a legislative proposal would enter into force”.
This would mean that there are currently around 132,300 premium refund claims and over 8,800 personal injury and death claims, of which only 2,200 claims would be affected by the changes in Parliament.
The FGA did not present an estimate of the amounts requested in these requests, but only the average amount approved for payment in these cases until March 31, 2024, as follows:
- for payment requests for cases of bodily injury and death – 59,286 lei
- for payment requests for premium refund – 863 lei
Compared to the number of payment requests above, it appears that the FGA would have to pay an average of over 130.4 million lei for the over 2,200 personal injury and death payment requests and over 114.1 million lei for the over 130,000 of premium refund requests.
In total, it would therefore be about 245 million lei (about 50 million euros).
Several sources close to this process, consulted by HotNews.ro, claim, however, that the financial impact related to the priority payment of these files will be smaller than the apparent one. Because many payment requests are “duplicated”, being entered into the system twice.
FGA supports priority payment in these cases. What does it say about the financial impact?
“Specific to the CAR legislation is to ensure greater protection for victims of road accidents, among whom are minors, in some cases orphans of both parents, and people who have suffered significant bodily injuries,” FGA officials said when asked if they support priority payment of RCA damages.
Regarding the payment process, the FGA officials also stated for HotNews.ro that “it will not be influenced by the prioritization of the settlement of payment requests regarding cases of bodily injury and death, their percentage being insignificant in relation to the total of payment requests “.
ASF Vice President: In a maximum of 2 months, the problem of almost 100,000 insurance creditors, natural persons, will be solved
And Sorin Mititelu, the new insurance vice-president of the Financial Supervisory Authority (ASF), supports this legislative amendment that will give priority to the payment of RCA claims.
- “Effect of the amendments related to the criteria for prioritizing FGA payments, two types of problems will be solved: one of a social, humanitarian nature, and the other concerns the improvement of FGA efficiency,” said Mititelu.
- “Practically, in a maximum of 2 months it will be possible to solve the problem of almost 100,000 insurance creditors, natural persons, with a financial effort of the FGA almost equal to that for the current payments of the FGA during a single month”
- “So, almost 40% of the FGA portfolio no longer has to wait up to 4 years until the FGA would pay according to the current rules, and the FGA no longer has to administer this portfolio for 3-4 years, with the rigorous costs, both financial , as well as public trust in the institution”, Sorin Mititelu, ASF vice-president, told HotNews.ro.
The rest of the victims have to wait 3-4 years to receive their money, if the FGA does not find other funding sources
He points out that “for the rest of FGA’s insurance creditors, who should also be paid in a short period of time, given their high total payment value, regardless of what the payment prioritization criteria would be, the main issue where it is necessary to identify a viable solution is that of the source of financing their payment”.
- “Based on the current funding sources, a waiting period of up to 3-4 years will be necessary,” the ASF official also said.
Hundreds of thousands of injured parties demand over 4.19 billion lei from the FGA on account of RCA insurances from City Insurance and Euroins
The Insured Guarantee Fund (FGA) recently announced that it has paid approximately 1.86 billion lei to the insurance creditors of City Insurance and Euroins, until March 31, 2024, after processing more than 193,000 payment requests.
In the case of City Insurance, FGA received 264,310 payment requests, of which it paid only 162,143 requests worth 1.6 billion lei by the end of March this year.
In the case of Euroins, FGA received 232,219 payment requests, of which it paid only 30,924 requests in the amount of 255.2 million lei.
Estimates for the City and Euroins bankruptcies exceeded 800 million euros
- “The estimated payment obligations for City Insurance amount to approximately 1.94 billion lei, and for Euroins Romania they are approximately 2.25 billion lei,” FGA officials told HotNews.ro.
This means more than 800 million euros. Delays in the analysis and payment of these payment requests are of the order of months.
In the case of City Insurance, the FGA is currently reviewing payment claims registered up to 6 August 2022, while in the case of Euroins, the FGA is currently reviewing claims registered up to 7 May 2023.
FGA approves 11,000-12,000 requests for payment every month, worth 90-100 million lei
At the request of HotNews.ro, FGA communicated that the funds available on March 31, 2024 were approximately 159 million lei and that this accounting balance is dynamic, changing monthly, compared to the monthly situation of receipts and payments made in favor of creditors of insurance.
- “The settlement of payment requests registered with the Fund, for the insurance creditors of the two insurers City and Euroins, is carried out according to the available funds of the FGA. The special commission approves the payment of amounts of approximately 90-100 million lei/month, an amount related to a number of 11,000-12,000 payment requests per month, depending on their complexity”, stated FGA officials.
If the FGA money is not sufficient, the receivables will be honored to the extent of replenishment of the Fund
“In the event that the Fund’s availability is not sufficient to cover the amounts due to insurance creditors, their claims will be honored to the extent that the Fund is supplied with the financial resources provided for by law,” says the FGA.
In addition, the Fund referred to the same draft law to be adopted in Parliament, which would provide new financial leverage for the payment of damages.
Photo source: Dreamstime.com
