Order no. 113130/2006
For enacting the Regulations regarding the assets admitted to cover the gross technical reserves for the insurer pursuing non-life insurance activity, the spread of the assets admitted to cover gross technical reserves, as well as liquidity ratio.

(Published in the Official Monitor, Part I no. 960, 29/11/2006)

Having in view the provisions of the article 4 paragraph (27) and of the article 22 paragraph (1) of the Law no. 32/2000 regarding insurance activity and insurance supervision, with subsequent amendments and completions,
According to the Decision of the Insurance Supervisory Commission Council dated November 2, 2006, through which were adopted the Regulations regarding the assets admitted to cover the gross technical reserves for the insurer pursuing non-life insurance activity, the spread of the assets admitted to cover gross technical reserves, as well as liquidity ratio,

the president of the Insurance Supervisory Commission issues the following order:

Art. 1.- The Regulations regarding the assets admitted to cover the gross technical reserves for the insurer pursuing non-life insurance activity, the spread of the assets admitted to cover gross technical reserves, as well as liquidity ratio, provided for in the annex part of the present order, are enacted.
Art. 2.- The present Order shall enter into force starting January 1st, 2007.
Art. 3.- At the date of entering into force of the present Order, the folowing normative acts are being abrogated:
a) Order of the President of the Insurance Supervisory Commision no. 3110/2003 for enacting the Regulations regarding the categories of assets admited to cover the technical reserves of the insurer pursuing non-life insurance activity, rules for spread the investments, as well as the liquidity ratio, published in the Romanian Official Monitor, Part I, no. 770 from November 3, 2003;
b) Order of the President of the Insurance Supervisory Commission no. 3.109/2005 for enacting the Regulations regarding technical reserves for non-life insurance, assets admited to cover them and spread of the assets admited to cover the gross technical reserves, published in the Official Monitor, Part I, no. 615 from July 15, 2005.

Art. 4.- The Financial Stability and Actuarial General Department within the Insurance Supervisory Authority ensures the fulfillment of the provisions of the present Order.

President of the Insurance Supervisory Commission,
Angela Toncescu

Bucharest, November 6, 2006.
No. 113.130.

ANNEX- REGULATIONS regarding the assets admitted to cover the gross technical reserves for the insurer pursuing non-life insurance activity, the spread of the assets admitted to cover gross technical reserves, as well as liquidity ratio.

ARTICLE 1
(1) When investing the assets admitted to cover the gross technical reserves, the type of activity carried on by the insurance undertaking shall be taken into account, in order to ensure the yield, the safety and the marketability of the investments, the insurer undertaking ensuring the spread of the mentioned assets.
(2) The insurance undertakings shall cover their gross technical reserves with matching assets according to the provisions of the article 6.
(3) For activities pursued in the Member States, the assets admitted to cover the gross technical reserves must be located on the territory of the mentioned Member States.

ARTICLE 2
The categories of assets admitted to cover gross technical reserves are:
A. Investments:
(i) state bonds and tresory bonds issued by the member states;
(ii) bonds issued by authorities of the local public administration;
(iii) bonds and other instruments of the monetary and capital market, assimilated to the them, traded on a supervised market;
(iv) shares and other variable-yield participations, asimilated to those, traded on a market that is not supervised;
(v) units in undertakings for collective investment in securities and other investment funds;
(vi) deposits and current accounts at credit institutions;
(vii) lands, buildings owned by undertakings;
(viii) loans.
B. Debts:
(i) Debts owned by policyholders and intermediaries arising out of direct insurance operations and reinsurance acceptances;
(ii) the part of the technical reserves afferent to the contracts ceded in reinsurance;
(iii) interests to cash afferent to the assets admited to cover the gross technical reserves.
C. Others:
(i) tangible assets, other than land and buildings;
(ii) deferred acquisition costs;
(iii) cash in hand.

ARTICLE 3

In the evaluation of the assets admited to cover the gross technical reserves, it shall be ensured the compliance with the following priciples:
a) assets admited to cover gross technical reserves shall be valued at their net value, without including the acqisition costs;
b) assets admited to cover the gross technical reserves shall be valued on a prudent basis, taking into account any future failures. Tangible assets, other than lands or buildings, may be admited to cover gross technical reserves only if they are valued on the basis of prudent amortization;
c) the loans granted, according to the provisions of the law, to the undertakings, to the state or to the international organizations, local or regional authorities and to the natural persons may be admited to cover the gross technical reserves only if there are enough guarantees as to their security, based on the status of the baborrower, mortgages, bank guarantees or gurantees granted by the insurance undertakings or other forms of guarantees;
d) the value of any debts admited to cover the gross technical reserves must be calculated on a prudent basis, taking into account any future losses. Debts from policyholders and intermediaries arising from direct insurance operations and reinsurnce acceptances may be accepted to cover the gross premium reserves, up to their level and only if they have been outstanding for not more than three months;
e) In case that a subsidiary of the insurance undertaking manages all or part of the insurer`s investments, when applying the provisions of the art. 1-4, the assets of the subsidiary shall be taken into account; the assets of other subsidiaries may be treated in the same way;
f) Deferred acqusition costs may be accepted to cover the technical reserves only if their calculation method is consistent with the calculation of the premium reserves;
g) Lands and buildings may be accepted to cover the gross technical reserves only if the insurance undertaking prooves that they are in its property and are free of any foreseeable liabilities. The prooving act of the property shall be submitted together with the financial reports for the financial year 2006; at each subsequent reporting the insurer shall declare on its own responsability whether there are any amendments regarding the status of the property;
h) The buildings admited to cover the gross reinsurance technical reserves shall be insured against all the risks they are exposed to, at least at the level of the value taken into consideration for covering the gross technical reserves, on the basis of a distinctive insurance contract with another insurer, or they shall be self-insured, provided that at least 70% of the risk is ceded in reinsurance, to reisnurance undertakings on the international market.

ARTICLE 4
Rules regarding the spread of the assets admited to cover gross technical reserves

(1) The insurance undertaking carrying on the non-life insurance activity may invest no more than:
1. 50% of the gross technical reserves in shares, bonds and other instruments of the capital market traded on a regulated and supervised market, as well as debt securities in undertakings for collective investment in securities, according to the provisions of the art. 2;
2. 5% of the total gross technical provisions in shares and other negotiable securities treated as shares, bonds, debt certificates and other money and capital market instruments, as well as debt securities in undertakings for collective investment in securities issued by the same undertaking;
3. 40% of the gross technical reserves in lands and buildings, according to the provisions of the point 4;
4. 10% of the gross technical reserves in any piece of land or building or in a number of lands or buildings close enough to each other to be considered effectively as one investment;
5. 90 % of the gross technical reserves in deposits and cash with credit institutions, but no more than 25% of the gross technical reserves in one credit institution;
6. 10% of the gross technical reserves in tangible assets, other than lands and buildings;
7. 3% of the gross technical reserves in the form of cash in hand;
8. 1% of the gross technical reserves for every loan, others than the loans granted to credit institutions, insurance undertakings or investment undertakings from a Member State, but no more than 5% of the gross technical reserves in the total of loans.

(2) In case of the categories of assets admited to cover the gross technical reserves, other than the ones provided for in art. (1), for which there has not been provided maximal limits, the insurer should comply with the following rules, when investing them:
1. assests covering gross technical reserves must be diversified and spread in such a manner as to ensure that there is no excessive use of any particular category of assets, investment market or investment;
2. investments in particular types of assets, which show a high level of risk, whether because of the nature of the asset, or because of the quality of the issuer, must be restricted to a prudential level;
3. limitations for particular categories of assets must take into account the treatment of reinsurance in the calculation of the technical provisions;
4. in case a subsidiary of the insurer manages all or part of the investments of the insurer, when applying the provisions of the art. 2-4, the assets of the subsidiary shall be taken into account, the assets of other subsidiaries of the insurer beeing treated in the same way;
5. when the assets held include loans or bonds isued by certain credit institutions, when applying the principles provided for by this article, the Insurance Supervisory Commission shall take into account the assets held by the mentioned credit institutions. This treatment may be applied only when the credit institution has its head office in a Member State, it is entirely owned by that Member State and/or by the local authorities of that Member State and its activity according to its articles of association consists of granting, through intermediaries, of loans guaranteed by the State or by the local authorities or loans granted to the bodies having strong connections with the state or the local authorities.

ARTICLE 5
Liquidity ratio

(1) The Liquidity ratio represents the report between liquid assets and short term responsibilities of the insurance undertaking towards insureds.
(2) The liquid assets are:
a) state securities and bounds issued by the local public administration authority;
b) bank deposits;
c) cash availabilities in bank and in hand;
d) securities traded on supervised and regulated markets, according to the following conditions:
- in the limit of 5% of the total of securities issued by the same entity;
- in the calculation of the liquid assets, the bounds shall be weighted with a coefficient of 0.75;
- in the calculation of liquid assets, the shares shall be weighted with a coefficient of 0.50;
e) debt securities to the undertakings for collective investment in securities, weighted with a coefficient of 0.90, in the limit of maximum 20% of the net asset for each fund.
(3) The assets mentioned at paragraph. (2) letters. d) and e) shall be taken into consideration in the limit of 50% of the total of the liquid assets.
(4) The liquid assets not free of any foreseeable liabilities re not taken into consideration for the calculation of the liquidity ratio.
(5) The insurance undertaking obligations towards the insureds, on short term, are represented by the gross claim reserve.
(6) The insurance undertakings have the obligation to have the liquidity ratio for the non-life insurance business at least 1.
(7) For the activities pursued in the Member States, the liquid assets should be placed on the member states territory.

ARTICLE 6
Matching rules

(1) Where the guarantee mentioned in the contract is expressed in a certain currency, the commitments taken by the insurance undertaking are considered to be payable in that certain currency.
(2) Where the guarantee mentioned in the contract is not expressed in a certain currency, the commitments of the insurance undertaking are considered to be payable in the currency of the country where the risk is placed. Still, the insurance undertakings can use the currency used for the premiums, if there is an appropriate framework to adopt this kind of solution. This action is possible in the case when, from the moment of the entrance into force of the contract, it is slightly possible for the claim to be paid in the same currency as the one used for cashing the premium, and not in the currency belonging to the country where the risk is placed.
(3) The Insurance Supervisory Commission can authorize the insurance undertaking to take into consideration, in order to cover the risk, the currency that it is using, according to the experience gained, or, where there is no experience the currency of the country where the insurance undertaking has its head office, for the contracts covering the risks for classes 4, 5, 6, 7, 11, 12 and 13( only the civil liability of the producers), and for the contracts covering risks for other insurance classes, depending on the nature of the risks, the risk assurance shall be made in another currency then the one resulting from the applicability of the procedures mentioned above.
(4) Where a claim has been reported to an insurance undertaking, claim that can be paid in a certain currency, other than the one resulting from the appliance of the procedures mentioned above, the insurance undertaking’s commitments shall be paid using that currency and, especially in the currency established by the Court of Law or through an understanding concluded between the insurance undertaking and the insured.
(5) Where a claim is reported, in a currency already known by the insurance undertaking, different than the one resulting from the appliance of the procedures mentioned above, the insurance undertaking’s commitments can be paid in that currency.
(6) The insurance undertakings are allowed not to cover the technical reserves through matching asset, if by applying the procedures mentioned above is resulting their obligation to keep the assets in a currency that will not exceed 7% of the assets in other currency, in order to comply with the matching principle.
(7) In the case when the commitments can be paid in a currency, other than the one of a member state, if the investments in that currency are regulated, if the currency is subject to some transfer restrictions or if, for similar reasons, the currency is not proper to cover technical reserves, the insurance undertakings are not forced to comply with the matching principle.
(8) The insurance undertakings can possess assets that are not matching assets, to cover an amount that will not exceed more than 20% of their responsibilities in a certain currency.
(9) In the case when the responsibilities and the assets are in a currency of a Member State, they are considered to be in euro.

ARTICLE 7
Assets that are not used to cover gross technical reserves.

The provisions of art. 1-4 are not applicable to the assets that are not used to cover gross technical reserves. The insurance undertakings practicing non-life insurance business are free to decide upon the mentioned assets, tangible or non-tangible, which are included in their total assets.

ARTICLE 8
Securities in credit institutions or in investment companies that are no longer pursuing business concerning their activity and/or under any circumstances have ceased their activity and/or did not comply with the provisions towards third parties will not be accepted to cover technical reserves for non-life insurance business.

ARTICLE 9
The asset categories mentioned at art. 2 are admitted to cover gross technical reserves only when they are not free of any foreseeable liabilities.

ARTICLE 10
Non-complying with the provisions of the present regulation is sanctioned according to the provision of art. 39 of the Law no. 32/2000 regarding insurance business and insurance supervision with the subsequent amendments and completions.

ARTICLE 11
The present regulations are transposing art. 20, 21, 22 and 26 of the Directive 92/49/CEE and annex 1 to Directive 88/357/CEE.