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LAW CONCERNING THE SET-UP, ORGANISATION AND OPERATION OF COMMERCIAL

COMPANIES FOR INSURANCE ACTIVITIES (LAW No.47 / 16 July 1991)

 

Chapter I General Provisions

Art. 1.

In Romania, the insurance activities will be performed by the "Insurance Companies" (Underwriter), "Insurance-Reinsurance Companies" and "Reinsurance Companies" which will accept to cover certain risks for a fee (premium) paid by the insured or by the reinsured entity. The insurance activities may be performed also through intermediaries (intermediary agencies), which negotiate and conclude insurance/reinsurance contracts on behalf of the companies mentioned in Art.1., or may provide certain services for concluding and executing such contracts.

Art. 2.

Setting-up companies in the field of insurance activities, with foreign participation, is allowed only in association with Romanian legal persons or legal entities.

Art. 3.

The companies acting in the insurance business, mentioned in the articles 1. and 2. above, might be set-up as joint-stock companies or as limited liability companies. The companies mentioned in the previous paragraph, will operate in accordance with the Law concerning the commercial companies and, if it would be the case, in accordance with the Foreign Investments Law and the provisions of this present Law.

Art.4.

The foreign companies and the associations of foreign insurers may open representation offices in accordance with the Law as follows:

1.the company should be legally constituted in the country of origin, should have operated, during the last 10 years, in the insurance business and must not be in any payment default or bankruptcy position;

2.the company should deposit into a Romanian Bank, as a Guarantee, an equivalent amount of cash to cover the minimum amount of capital required by the by-law of the newly established company, in accordance with the provisions of the Art.8.;

3.the company should obtain the approval of the Ministry of Finance - The Office for Monitoring the Activities of Insurance- Reinsurance. The representation offices, opened in Romania, according to the para.1, may conclude:

4.insurance-reinsurance contracts with foreign legal entities or foreigners or for their assets or properties; 5.reinsurance contracts with insurance companies, reinsurance companies and Romanian reinsurance companies.

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Chapter II Setting-up, Organisation and Operation of Insurance Companies

Art. 5.

Companies in the insurance business may be set-up after the approval of the Office for Monitoring the Insurance Activities of the Ministry of Finance.

Art. 6.

For obtaining the approval, the applications should contain the following documents: the rationale for engaging in such activity, financial analysis and projections, the by-law, statement of equity contribution and other capital subscribed.

The applicants may legally contest, at the level of the Minister of Finance, any justified rejection of their application, within 15 days after receiving the notification of the rejection. His or her further justified rejection decision might be further attacked in the Romanian Court (Tribunalul Municipiului Bucuresti), within 30 days after receiving the notification of rejection.

Art. 7.

The companies operating in the insurance business may cover one or more insurance reinsurance categories according to their statute or contract of association, such as:

1.life insurance;

2.personal insurance, other than life insurance;

3.vehicles insurance;

4.maritime and transport insurance;

5.aviation insurance;

6.fire insurance and assets insurance;

7.civil insurance;

8.credit and guarantee insurance;

9.insurance against financial losses from insured risks;

10.agricultural insurance;

Art. 8.

The lower limit of the amount of capital subscribed to set up an insurance company is:

1.25,000,000 lei, in case of the insurance, insurance- reinsurance and reinsurance companies, separately for each of the categories of insurance-reinsurance listed in Art.7.

2.1,500,000 lei for intermediary agencies;

The capital deposited at the moment of setting-up the company cannot be less than 50 % of the total of the capital subscribed.

Art. 9

The insurance-reinsurance companies operate, in general, in local currency (lei) except the cases when they commit themselves to make payments in hard currency.

The payments for insurance operations for Romanian citizens and their assets, when travelling abroad, will be made in local currency (lei).

Art. 10.

The insurance-reinsurance companies which operate also life insurances, must keep them in separate accounts, must manage separately these funds and make payments only for life insurances and must prepare, from time to time, final statements separately from the other kind of insurances.

Art. 11.

The insurance, insurance-reinsurance and reinsurance companies can commit themselves, yearly, through insurance contracts, to a total volume of payable insurance premiums up to five times the total capital deposited and other capital reserves, after deducting the premiums for reinsurance operations.

Art. 12.

For risk mitigation, the insurance, insurance- reinsurance and reinsurance companies may engage part of their liabilities with other reinsurance companies, unilaterally or on a reciprocal basis.

Art. 13.

The insurance, insurance-reinsurance and reinsurance companies can enter into certain agreements of coinsurance and other specific agreements for special cases of high risk operations which cannot be covered by only one company.

Art. 14.

Intermediary agencies are not allowed to conclude insurance contracts, on behalf of foreign insurance companies, with legal Romanian entities and Romanian citizens or their assets.

Art. 15.

The insurance companies may join national associations of this specific activities or international organisations and associations of the same profile.

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Chapter III Technical reserves, tariffs, placements

Art. 16.

The insurance, insurance-reinsurance and reinsurance companies must set up premium provisions for life insurances as well as other premium provisions for different insurance and reinsurances. Premium provisions for life insurances will be determined on the basis of the present calculations and will be managed separately.

The premium provisions for other categories of insurances or reinsurances, will be created out of the proceeds of un-expired risks for the years in which the insurance premiums have been received.

The provisions for damage compensations will be estimated on the basis of statistics or actuarial calculations regarding the projections of future payments. These provisions cannot be less than 40% of the difference between premiums received and the damage compensations paid for the insurances or the reinsurances valid for the current year.

Concerning the reserves for damage compensations, even identifiable, the creditors or insurers are not allowed to have a recourse on them. The insurance, insurance-reinsurance and reinsurance companies which operate also on hard currency should make provisions both in local and hard currency.

The amount of premium provisions for life insurance as well as premium provisions and damage compensations for other type of insurances or reinsurances are deducted from the income to determine the profit.

Art.17.

The insurance, insurance-reinsurance and reinsurance companies will set up the conditions for the optional insurances, in compliance with the law regarding the Insurance Contract as well as premiums for such kind of insurances.

In the reinsurance operations, the conditions and the premiums are provided in the reinsurance contract.

Art. 18.

Intermediary agencies set up the commissions or the fees they charge for their services, through the contracts they conclude with the insurance, insurance-reinsurance and reinsurance companies.

Art. 19.

For concluding and for the execution of the insurance contracts, the insurance and the insurance-reinsurance companies may use insurance agents. They will be paid commissions from the insurance premiums or fees negotiated through the contracts.

Art. 20.

The insurance companies may use their own funds or other own sources as interest bearing deposits in banks or other saving facilities; in such cases, the interest will be part of their income.

The insurance companies may invest part of their capital in securities, bonds, real estate or may lend funds to banks, still keeping a liquidation rate, according to their statute.

The insurance companies capitalised with foreign participation as well as those which operate also in hard currency, may invest local currency and foreign currency in the operations mentioned above in this Article.

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Chapter IV The Balance Sheet

Art. 21.

The fiscal year starts at 1-st January and finishes at 31 December, excepting the first year of operations when it starts at the date the company was set up.

Art. 22.

The insurance companies must submit, yearly, to the Office for Monitoring the Insurance Activities, until latest 15 April of the next year, the Balance Sheet and the Income Statement, approved at the shareholders meeting or at the associates meeting and the Audit Report prepared by qualified Auditors.

The representing offices of the foreign companies have the same deadline, to submit, yearly, to the Office for Monitoring the Insurance Activities, the Financial Statements they submit to their headquarters in their countries of origin.

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Chapter V Monitoring the Insurance Activities

Art. 23.

For the purpose of monitoring the compliance with the law, for preventing the financial distress and bankruptcy and for protecting the interest and the rights of the insured entities, it was set up the Office for Monitoring the Insurance and the Reinsurance Activities within the Ministry of Finance.

The mission and the responsibilities of this Office will be defined through a Government Decision.

Art. 24.

The insurance and the insurance-reinsurance companies which provide vehicle-insurances will set up the "Bureau of the Vehicle Insurers" which will represent this companies on the local market and abroad and which will supervise the fulfilment of the international obligations of the insurance companies in civil and damage cases caused by vehicle accidents.

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Chapter VI Sanctions

Art. 25.

Non-compliance, by the insurance companies, with the provisions of the Art.10, Art.11, Art.16 para 1-4 and Art.22 para 1, constitutes an infringement and a fine of 10,000 - 150,000 lei will be charged.

Art. 26.

Non-compliance, by the representatives of the foreign companies and the foreign insurance companies association, of the provisions of the Art.4, para 2, a) and b) and Art.22 para 2, constitutes an infringement of the law and a fine of 10,000 - 150,000 will be charged.

Art. 27.

The auditors and other professionals who, in the performance of their duties to audit the Balance Sheets, the investments and any other capital investments or expenditures, on a purpose, distort the figures or compile false reports, will be fined with an equivalent amount of 5,000 - 75,000 lei, if their actions do not constitute an infringement of the law.

Art. 28.

The sanctions to be applied by the provisions of the Art. 25-27, will be enforced by the qualified supervisors nominated by the Office for the Monitoring of the Insurance and Reinsurance activities.

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Chapter VII Special Provisions, final and transitory

Art. 29.

There are tax exempted the following:

1.compensations, the insurance amounts provided and any other rights derived from any other insurance activity;

2.any funds transferred, any placements and changes in the portfolio from one insurance company or insurance-reinsurance company to another

3.insurance or insurance-reinsurance company.

Art. 30.

To the provisions of this present law, there are attached the provisions of the civil law, commercial law and contravention law.

Art. 31.

The provisions of this law do not apply to the mutual insurance cooperatives, mutual associations and societies of mutual support or funeral support.

Art. 32.

The insurance companies, already set up before the enactment of this present law, may proceed in their activity, provided that within 6 month they will restructure and organise themselves such as to be able to comply with the provisions of this present law.

Art. 33.

This law will be in force after 30 days after being published in the "Monitorul Oficial al Romaniei". On the same date, the Decree no.470/1971, concerning the organisation and operation of the "Administratia Asigurarilor de Stat" and any other contrary provisions, will be abrogated.

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