RCA issues in Romania: why current measures fail to resolve claims and victims

The collapse of City Insurance has left millions of claimants and victims in turmoil and created a crisis in Romania’s RCA market. The government has introduced emergency measures, which seem to favor insurers at the expense of those harmed. From mandatory auto insurance to risk-based pricing and the promised legislative amendments, the situation appears far from resolved.

The emergency ordinance aimed to speed up the processing of claims, but this intervention proved insufficient, addressing only part of the problem and leaving many cases unresolved.

The RCA Crisis Context After City Insurance’s Collapse

City Insurance held, before its collapse, roughly 40% of Romania’s RCA market, which helps explain the staggering number of claimants left without compensation. The government intervened with an Emergency Ordinance to accelerate the recovery of damages, but this intervention has proven inadequate. The core issue is that the Ordinance was designed to resolve quickly only a portion of the situation, leaving numerous special cases unresolved.

The BAAR Issues

The Bureau of Auto Insurers in Romania (BAAR) introduced a system that reduces the value of RCA policies, but in practice penalizes insureds without justification. The most serious problem is that insurers automatically receive a high-risk indicator even when they have no history of incidents.

This measure leads to several practical consequences:

1. Insurers charge 36% more than the reference tariff
2. Policyholders are unjustifiably categorized as high risk
3. At renewal, these policyholders will carry a false high-risk history
4. Statistics will incorrectly show a large number of high-risk policyholders, justifying later price increases

The Guarantee Fund for Their Insurance: How Recovery Works

Three million RCA policies were transferred to the Guarantee Fund for their Insurance (FGA) to process claim payments. The FGA is funded from the contributions of the insurers, effectively from the money of the insured drivers.

FG A Priorities After OUG

The Emergency Ordinance established a debatable prioritization:

• Priority 1: Claimants with files submitted after the collapse – fast processing
• Priority 2: Those with cases already in court before the collapse

The amendment proposed by transport associations requested equal rights for rapid recovery for both categories of claimants. This amendment appeared to be adopted, but the law was removed from the Parliament’s agenda.

Dozens of Thousands of Claimants Stuck in Waiting

Before the collapse, City Insurance already had numerous cases in litigation. The situation for these claimants is particularly complex:

• Those who already had rulings cannot receive payments
• Those still in process face indefinite delays
• There is no clear legal framework for paying claims obtained through definitive judicial decisions

COTAR (Federation of Insurance and Transport Operators in Romania) publicly criticized these discriminatory measures, highlighting that it is unjust to deny payments to those with definitive rulings when authorities have not established a solid framework.

Discrimination Between Insurers and Insured

A telling symptom of the power imbalance:

• Authorities extended the guarantee only for two months for insurers
• They did not extend the validity of the insureds’ policies
• Transport operators urge the Government to enact a new OUG that resolves insurance difficulties, not only those of insurers.

The True Cost of City Insurance’s Collapse

Initial loss estimates stood at €400 million. These figures were recalculated and dramatically adjusted to €1.8 billion – an increase of over 350%.

This collapse has destabilized the entire RCA market:

• Prices have risen unreasonably
• Insurers must pay more or seek higher charges to cover the losses
• Unjustified increases that exceed the needs for recapitalization

Promised Measures: Caps or Reductions?

Authorities have promised two types of measures:

1. Caps on RCA values – limiting the maximum price that can be charged
2. Reductions in RCA policy values – discounts for certain insureds

The problem is that the reduction measure comes with a “trap” – automatic categorization of drivers as high risk, even for those with no accidents.

Bonus-Malus System: From Reward to Penalty Without Motive

The Bonus-Malus system governs how premiums are adjusted based on claims history.

How Bonus-Malus Works Normally

• Drivers without claims receive discounts (bonus)
• Drivers with claims incur surcharges (malus)
• The maximum bonus is 50%
• The maximum malus is 180%

The Current Problem

• Insureds with no historical claims are automatically placed in the high-risk category simply because they benefit from the reduction measure.
• They end up paying 36% more than the reference tariff
• They are registered as high risk
• They will accumulate a false history that affects future prices
• This, in turn, justifies further price increases across the market

The CEC Insurance Policies: Unrealized Promises

In an attempt to stabilize the RCA market, the government announced the introduction of CEC Bank (Romania’s state bank) into the insurance market. Three months after the announcement, these policies do not exist and cannot be issued.

The situation is paradoxical:

• The measure was presented as a solution to stabilize prices
• CEC has blocked entry into the market
• The market remains populated only by private insurers
• There are no real alternatives

Conclusions and Outlook

The state of Romania’s RCA market after the City Insurance collapse shows signs of mismanagement by the authorities. Rather than protecting consumers and claimants, the measures taken seem to favor insurers.

The main issues that require urgent resolution are:

1. Pass amendments to address not-clarified cases
2. Eliminate automatic penalties for drivers with no history
3. Establish a framework for compensation for claimants with settled cases
4. Ensure transparent calculation of RCA settlements
5. Implement or discard CEC’s promises

Without corrective interventions, the situation will continue to deteriorate, eroding trust in Romania’s insurance system. Claimants and insured should not pay the price of mismanagement and regulatory gaps.