Microinsurance Moldova

Market Feasibility Study:
Microinsurance in the Republic of

Moldova
Zurich Financial Services

Global Microinsurance Practice
Alexandra Mihailescu
University of St. Gallen, Full-time MBA Program, Class of 2009
MBA Project
Professor Dr. Steven Floyd
May 2009
Acknowledgements I
Acknowledgements
First of all, special thanks to Professor Dr. Steven Floyd at the University of St. Gallen,
who not only served as my MBA academic advisor, but also provided guidance and
encouragement throughout the process. Your humanity, open-mindedness and intellect
will remain an inspiration to me throughout my career.
Thank you also to Zurich Financial Services for sponsoring this project, and for giving me
the incredible opportunity to learn more about microinsurance and to bring attention to
an often overlooked, but very special corner of Europe. In particular, I would like to
express my sincere appreciation to Raymond Risler who patiently and kindly provided
continuous support and feedback.
In addition, I would like to acknowledge and extend my heartfelt gratitude to all of the
organizations and persons who generously provided their time and valuable insights –
and without whom this paper would not have been possible. The hospitability and kind
cooperation I experienced in Moldova was extraordinary. In particular, I would like to
recognize Microinvest, who served as my on-site research partner; the help of Artur
Munteanu and Olga Fretescu was indispensable for helping organize interviews and
focus groups. Furthermore, I benefited greatly from the experience and assistance of
Roxana Savescu, Natalia Dubencu, Margarita Lalayan, Severine Deboos, Maria Ekström
Johansson and Michael McCord.
Finally, I cannot overlook the support of three extraordinary people in my life: my

parents, Anda and Nick, and my partner, Arthur, were my relentless champions –
providing constant motivation and acquiescing my moments of uncertainty. Thank you!
Executive Summary II
Executive Summary
As one microfinance client in the Philippines cleverly stated, “Life is one long risk.”1
Although risk is an inherent part of life, lower-income households are particularly
vulnerable to economic shocks. Without effective risk management tools, low-income
households are often the most vulnerable and yet, the least protected. This is where
microinsurance comes in.
Microinsurance is part of the broader concept of microfinance, which includes a variety of

“micro” financial services targeted to lower-income households. In definition,
microinsurance is not very different from traditional insurance, except that it targets a
different segment of a population. In reality, however, this entails an entirely different
way of thinking about insurance: new, simpler products, alternative distribution channels
and marketing instruments, as well as a focus on efficient operations.
With an annual per capita income of approximately $2,500 (PPP), the Republic of
Moldova is consistently ranked as one of the poorest countries in Europe. Often shuffled
between Russia and Romania, Moldova has a history peppered with cultural conflicts that
have left their mark on the small land-locked country. Today, it is heavily dependent on
agriculture and on remittances from labor migrants, as well as on its larger neighbor,
Russia for energy and for trade. About 30 percent of its 4.2 million population lives in
poverty (under $2 per day), and about 95 percent live on under $10 a day.2
The purpose of the present study was to assess the feasibility of introducing
microinsurance in Moldova. To address this key question, an understanding of both the
supply side (current insurance market) and the demand side (risks faced by low-income
persons and the coping strategies used to manage these risks) was necessary. The
majority of the primary research was conducted on-site in Moldova, in Chisinau and its
environs, during the month of March 2009. Qualitative research techniques were utilized,
including focus group discussions (FGD) and guided individual interviews with members
of both the public and private sector, as well as with international non-governmental
organizations, such as the World Bank, IMF and ILO.
Demand research revealed the following main risks faced by low-income households:
death or serious illness of a breadwinner, loss of the year’s harvest due to natural disaster,
and property loss. Currently, most households use self-insurance and informal insurance
as their primary risk management tools; savings and the purchase of fixed assets are
1 Cohen, M., & Sebstad. How poor people manage risk. The Microinsurance Centre Briefing Note #2.
2 World Bank PovcalNet, online poverty analysis tool. www.worldbank.org Retrieved April 2009.
Executive Summary III
utilized ex-ante, while borrowing or migrating for work are used to cover expenses ex-
post. Clearly, the effectiveness of such strategies is limited.
However, most low-income persons do not currently consider insurance as a viable

alternative. There are many ways to explain this: firstly, there is a lack of financial
education among the population about the purpose and benefits of insurance. Secondly,
there is a widespread lack of trust in institutions. In addition, most low-income
households feel they do not have sufficient financial resources, perceiving insurance as an
“extra” or even “wasteful” expense, or as a luxury product. Finally, most insurance firms
do not offer any products targeted to the lower-income population, nor are most firms
making a distinct effort to reach out to this segment.
Despite the passivity of firms in reaching out to lower-income people, a sentiment of

excitement surrounds the current insurance market. Supply research demonstrated that
the market is still small and underdeveloped, but has a good deal of potential. In the last
three years, there has been a marked consolidation among firms and brokerages while
total premiums have steadily increased. Simultaneously, there has been an explosion of
activity concerning trade associations and industry-specialized publications, which
signify the dynamic nature of the market. The driving force behind these changes is
primarily the 2006 insurance legislation which outlined a plethora of regulations that is
helping raise Moldova’s market to international standards.
Currently, most insurance firms offer a traditional product range, many relying on
automobile and other compulsory insurances. Direct sales through intermediaries (agents
and brokers) is very common, and marketing is primarily executed through traditional
mass media (television, radio, print advertising). One of the main issues with the current
product offering is that most products are not affordable, while payment is required in
full and upfront.
Microinsurance is a mostly unknown concept in Moldova. There is no specific

microinsurance legislation, although the government has expressed openness to the
possibility of developing one in the future. Microfinance, however, is quite well-
developed and regulated, which is often a pre-requisite for the successful launch of
microinsurance into a new market.
There is a clear need and demand for microinsurance in Moldova. The potential market is
estimated to include approximately 2.5 million persons.3 A microinsurance product
would need to offer both quality and flexibility, at a reasonable cost and with a flexible
3 Calculated as percentage of population living under $10 per day, based on World Bank figures. Further
details can be found in chapter 4.5
Executive Summary IV
payment plan. To address the key risks facing low-income Moldovans, the recommended
microinsurance products are personal accident, credit life, agriculture and property
insurance. Furthermore, trustworthy and far-reaching distribution channels which would
reliably provide access to the maximum number of people is important. For Moldova, the
recommended distribution channels are microfinance institutions and SCAs. Premium
payments and claims disbursements could also be handled through the Post Office, which
has the widest and most accessible branch network of any institution in Moldova. For
operations, the partnership model is recommended, whereby Zurich would liaise with an
on-site partner, who would in turn coordinate the respective delivery channels and
manage regulatory compliance.
Finally, investment in financial education is necessary for the success of microinsurance.

Raising the financial education and helping to build an insurance culture fosters a
favorable environment for all parties involved – buyers and suppliers. Therefore, it is
recommended that educational programs be implemented in collaboration with the
government as well as international organizations, trade associations and rural
organizations.
Exchange rate:
11.27 Moldovan Lei (MDL) = 1 USD
The above exchange rate is used throughout the paper for conversion into current figures.
All computations have been rounded and are therefore estimates.
Table of Contents V
Table of Contents
Acknowledgements ....................................................................................................... I
Executive Summary ..................................................................................................... II
Table of Contents ........................................................................................................ V
Index of Figures ....................................................................................................... VIII
Index of Tables ............................................................................................................ IX
List of Acronyms and Abbreviations ........................................................................ 1
1 Introduction to microinsurance .............................................................................. 2
1.1 Understanding the risks and vulnerabilities of low-income households ... 2
1.2 Overview of microinsurance .............................................................................. 4
1.3 Zurich Financial Services – Global Microinsurance Practice ........................ 7
2 Country context: the Republic of Moldova .......................................................... 9
2.1 Brief historical and cultural overview .............................................................. 9
2.2 Economic and political environment .............................................................. 11
2.3 Health in Moldova ............................................................................................. 14
2.4 Climate and natural disasters .......................................................................... 15
3 Supply: The insurance industry in Moldova .................................................... 17
3.1 Industry overview ............................................................................................. 17
3.2 The role of government in insurance .............................................................. 19
3.2.1 The National Commission on Financial Markets ............................... 19
3.2.2 The Department of Insurance Supervision ......................................... 21
3.2.3 Insurance legislation ............................................................................... 21
3.2.3.1 Microinsurance legislation ........................................................ 22
3.2.3.2 Compulsory insurances ............................................................. 22
3.2.4 The National Health Insurance Company .......................................... 24
3.2.5 State-subsidized agricultural insurance .............................................. 25
3.3 Insurance trade associations ............................................................................ 26
3.3.1 The Moldovan Union of Insurance Providers .................................... 26
3.3.2 The Actuary Association of Moldova .................................................. 27
3.3.3 The Association of Insurance Brokers of Moldova ............................ 28
3.3.4 The National Office of Automobile Insurers ...................................... 28
3.4 Industry-specific publications ......................................................................... 29
3.4.1 ARS Assecuratiorum: the Art of Insurance Magazine ..................... 29
Table of Contents VI
3.4.2 Asigurare.md: the Online Insurance Portal ....................................... 30

3.5 Overview of insurance firms............................................................................ 30
3.5.1 Moldasig ................................................................................................... 32
3.5.2 ASITO ....................................................................................................... 33
3.5.3 Grawe Carat ............................................................................................. 34
3.5.4 MOLDCARGO ........................................................................................ 35
3.5.5 Donaris Group ......................................................................................... 35
3.5.6 Garantie .................................................................................................... 36
3.6 Insurance products ............................................................................................ 37
3.6.1 Supplementary health insurance .......................................................... 38
3.6.2 Property insurance.................................................................................. 39
3.6.3 Automobile insurance ............................................................................ 40
3.6.3.1 RCA: Compulsory motor third party liability insurance .... 40
3.6.3.2 Autocasco: Supplementary comprehensive automobile
insurance.................................................................................... 41
3.6.3.3 “Carte verde” – the International Green Card System ......... 41
3.6.4 Life insurance .......................................................................................... 42
3.6.5 Credit Life Insurance .............................................................................. 43
3.7 Distribution channels and marketing ............................................................. 43
3.7.1 Distribution channels: General overview........................................... 43
3.7.2 Distribution channel: Insurance brokers ............................................ 44
3.7.3 Marketing overview ............................................................................... 45
4 Demand: Profile of potential microinsurance customers ............................... 47
4.1 Risks and lifecycle events faced by low-income persons............................. 47
4.1.1 Lifecycle risks .......................................................................................... 47
4.1.2 Environmental risks ............................................................................... 49
4.1.3 Business risks ........................................................................................... 50
4.2 Coping strategies and their effectiveness ....................................................... 50
4.2.1 Ex-ante strategies .................................................................................... 50
4.2.2 Ex-post strategies .................................................................................... 52
4.2.3 Assessment of coping strategies ........................................................... 52
4.3 General attitudes about insurance .................................................................. 53
4.4 Reasons for lack of insurance ........................................................................... 55
4.5 Demand and potential microinsurance market ............................................ 58
Table of Contents VII
5 Recommendations: Introducing microinsurance to Moldova ....................... 59

5.1 Product recommendations ............................................................................... 59
5.1.1 Health insurance ..................................................................................... 60
5.1.2 Agricultural insurance ........................................................................... 61
5.1.3 Property insurance.................................................................................. 62
5.1.4 Life, personal accident and credit life insurance ................................ 63
5.2 Distribution channels recommendations ....................................................... 64
5.2.1 Microfinance institutions ....................................................................... 64
5.2.1.1 Overview of MFIs ....................................................................... 64
5.2.1.2 Policies on credit life insurance at MFIs.................................. 66
5.2.1.3 Criteria for microinsurance ....................................................... 67
5.2.2 Savings and Credit Associations .......................................................... 68
5.2.2.1 Overview of SCAs ...................................................................... 68
5.2.2.2 Policies on credit life insurance ................................................ 70
5.2.2.3 Criteria for microinsurance ....................................................... 71
5.2.3 The Post Office of Moldova ................................................................... 71
5.2.3.1 Overview ..................................................................................... 71
5.2.3.2 Criteria for microinsurance distribution ................................. 72
5.2.4 Additional alternative distribution channels...................................... 72
5.3 Marketing recommendations ........................................................................... 73
5.4 Operational model recommendations ............................................................ 75
6 Conclusions .............................................................................................................. 78
Bibliography: Articles, reports and studies .......................................................... 80
Bibliography: Web pages ......................................................................................... 84
Bibliography: Interviews ......................................................................................... 87
Appendix 1: Methodology ....................................................................................... 93
Appendix 2: Additional tables and figures .......................................................... 98
Appendix 3: Photos ................................................................................................. 101
Appendix 4: Additional information on MFIs and SCAs................................ 108
Appendix 5: Declaration of authorship ............................................................... 122
Index of Figures VIII
Index of Figures
Figure 1: Risks and the cycle of vulnerability and poverty .................................. 2
Figure 2: The impacts of risks facing low-income people .................................... 3
Figure 3: Types and examples of insurances ........................................................... 4
Figure 4: The microinsurance supply chain ............................................................ 6
Figure 5: Insurance market premiums, 2002-2008................................................. 17
Figure 6: Organizational structure of the CNPF ................................................... 20
Figure 7: Market share of five top insurance firms, in 2008 ............................... 31
Figure 8: 2008 total premiums, top ten insurance firms ...................................... 32
Figure 9: Percentage of total insurance premiums by category ......................... 37
Figure 10: Distribution of SCAs among microfinance institutions .................. 66
Figure 11: Risks, uncertainties and responses....................................................... 98
Figure 12: Characteristics of an insurable risk ...................................................... 98
Figure 13: Selection from UAM 2009 Plan of Activities .................................... 100
Figure 14: Selection from ABAR 2009 Charter .................................................... 100
Figure 15: Microinvest loan portfolio, 2004-2009* .............................................. 110
Figure 16: Microinvest number of active contracts, 2004-2009* ...................... 110
Figure 17: RFC portfolio composition, 2005-2008 .............................................. 113
Figure 18: Organizational structure of SCAs in Moldova ................................ 117
Figure 19: Overview of SCA licensing requirements ........................................ 118
Figure 20: Fee structure between MFIs and SCAs ............................................. 121
Index of Tables IX
Index of Tables
Table 1: ZFS’s microinsurance markets, products and distribution channels.. 8
Table 2: Demographic overview of Moldovan population ................................ 11
Table 3: Macroeconomic overview of Moldova .................................................... 14
Table 4: Health statistics overview of Moldova ................................................... 15
Table 5: Top causes of death in Moldova .............................................................. 15
Table 6: 2008 key figures of the Moldovan insurance market ........................... 18
Table 7: Listing of compulsory insurances ............................................................ 23
Table 8: 2008 Key figures for Moldova’s top insurance firms ........................... 32
Table 9: Overview of select insurance products in Moldova, 2008 ................... 38
Table 10: Overview of risks faced by low-income persons in Moldova.......... 47
Table 11: Reasons for lack of insurance in Moldova ........................................... 55
Table 12: Summary of risks and recommended insurance products ................ 59
Table 13: 2008 Key figures of Moldovan SCAs, December 2008 ....................... 69
Table 14: Overview of SCAs interviewed, March 2009 ....................................... 94
Table 15: Listing of insurance firms, March 2009 ................................................. 99
Table 16: Listing of insurance brokerages, March 2009 ...................................... 99
Table 17: Summary of 2008 SCA balance sheet .................................................. 119
Table 18: Overview of 2008 SCA loan portfolio ................................................. 119

Introduction to microinsurance 1
List of Acronyms and Abbreviations
AAM Actuarial Association of Moldova
ABAR Association of Insurance Brokers
BNAA National Office of Automobile Insurers of Moldova
CBO Community-Based Organization
CEE Central and Eastern Europe
CNAM National Health Insurance Company
CNPF National Commission on Financial Markets
DIS Department of Insurance Supervision
EFSE European Fund for Southeast Europe
EBRD European Bank of Reconstruction and Development
IAA International Actuarial Association
IAIS International Association of Insurance Supervisors
IFAD International Fund for Agricultural Development
ILO International Labour Organization
IMF International Monetary Fund
IOM International Organization for Migration
MAFI Ministry of Agriculture and Food Industry
MBA Mutual Benefit Association
MMA Microfinance Alliance of Moldova
MDL Moldovan leu
NGO Non-governmental organization
NIS New Independent States
RDC Rural Development Center
RFC Rural Finance Corporation
SCA Savings and Credit Association
SDC Swiss Agency for Development and Cooperation
UAM Union of Moldovan Insurance Providers
WHO World Health Organization
ZFS Zurich Financial Services

1 Introduction to microinsurance
1.1 Understanding the risks and vulnerabilities of low-income
households
As one microfinance client in the Philippines cleverly stated, “Life is one long risk.”4
Although risk is an inherent part of everyone’s life, lower-income households are
particularly vulnerable to the economic shocks caused by events such as the death of a
breadwinner or loss of the year’s harvest due to natural disaster. Without effective risk
management tools, many low-income households resort to strategies that result in the
perpetuation of the cycle of vulnerability and poverty, as depicted in figure 1 below. This
ongoing sequence of uncertainty and apprehension means that lower-income households
are generally less likely to take advantage of potential opportunities to invest and
generate income that could help reduce poverty.5
Figure 1: Risks and the cycle of vulnerability and poverty
Source: Adapted by author from Churchill, 2003.
Figure 2 below outlines the three stages that ensue once a risk occurs: first is the actual
risk event, followed by the short-term response and then, potential long-term
consequences. Some response strategies are lower-stress ones such as reducing
consumption, while others are medium-stress strategies such as migrating to find
4 Cohen, M., & Sebstad. How poor people manage risk. The Microinsurance Centre Briefing Note #2.
5 Churchill, C. (ed). 2007. Protecting the poor: A microinsurance compendium. Geneva, CH: International Labour
Organization and Munich Re Foundation.
additional work. Still others are high stress mechanisms, such as selling productive assets
or taking children out of school.
Figure 2: The impacts of risks facing low-income people
Source: Adapted by author from Cohen and Sebstad, 2005.
In order to cope with uncertainty, many low-income households employ a variety of

informal risk management techniques, some ex-ante (before risk occurs) but primarily ex-
post (after the risk occurs). Most lower-income households are forced by their
circumstances to manage risks reactively rather than proactively. Meanwhile, many ex-
post strategies can drain households of their assets and resources, while also placing
claims on future cash flows.6 As Craig Churchill stated, most low-income households
have to “patch together support from a variety of sources,” and even this does not “stand
up well against a series of perils.”7
In general, insurance can be classified into four categories, as outlined in figure 3 below.
Some low-income persons may benefit from government-subsidized social security,
although statistics show that over half of the world’s population has no access to social
protection.8 Very few have access to formal insurance, and indeed, many perceive
6 Microinsurance Centre LLC. www.microinsurancecentre.org. Retrieved February 2009.

insurance as a luxury product reserved for wealthy persons. The majority of low-income
households utilize self-insurance or informal insurance, which may work well for smaller-
impact or shorter-term losses. However, the key criteria used to judge the effectiveness of
such strategies – affordability, accessibility, coverage and timeliness – unfortunately are
not met by any of the strategies primarily employed by low-income households.9 Studies
have shown that many resort to borrowing, an inadequate strategy often leading to a
vicious cycle of heavy indebtedness.10 Indeed, low-income households are the most
vulnerable and yet, the least protected. This is where microinsurance comes in.
Figure 3: Types and examples of insurances
Source: Adapted by author from Churchill, 2007.
1.2 Overview of microinsurance
Microinsurance is insurance that targets low-income persons – many employed in the

informal economy – who are typically underserved by traditional insurance firms. It is
part of the broader concept of microfinance, which includes “micro” financial services
such as credit and savings targeted to lower-income households. Interestingly, when
insurance started to be widely employed in the late 1800s, it was considered a “poor
man’s service,” since wealthier persons were deemed capable of insuring themselves.11
9 Cohen, M., & Sebstad. Making microinsurance work for clients. The Microinsurance Centre Briefing Note #3.
10 Roth, J., McCord, M., Liber, D. 2007. The landscape of microinsurance in the world’s 100
poorest countries. The Microinsurance Centre, April.
11 Churchill, C. (ed). 2007. Protecting the poor: A microinsurance compendium. Geneva, CH: International
Labour Organization and Munich Re Foundation.
As the industry evolved, the perceptions have become transposed. Today, most insurance
firms do not offer products targeted to low-income populations, nor do they utilize
distribution channels that reach low-income people.
In definition, microinsurance is not very different from traditional insurance, except that it
targets the lower-income segment. In reality, however, this entails an entirely different
way of thinking about insurance: new, simpler products, alternative distribution channels
and marketing instruments, as well as a focus on efficient operations. Volume is
necessary to lower transaction costs, and therefore, streamlined processes and automated
systems are often utilized. It also requires an adequate regulatory environment, and
preferably, specific microinsurance legislation. A microinsurance product should fulfill
several key characteristics:
• Relevant to the risks of low-income households

• As inclusive as possible
• Affordable premiums
• Preferably grouped for efficiencies
• Have clearly defined, simple rules and restrictions
• Have easily accessible claims documentation requirements
The most common microinsurance product is credit life, since microinsurance first
stemmed from the microfinance industry, whereby creditors searched for a method to
cover their losses in case of the death or incapacity of the borrower. Other common
microinsurance products are health and life insurances, with agricultural, property and
automobile insurance growing gradually. Compared to microfinance, however,
microinsurance faces specific challenges: the ubiquitous lack of insurance culture and
financial education in most developing countries was identified as the single largest
obstacle to the growth of microinsurance.12 In addition, unlike a bank loan or a savings
deposit, insurance is an intangible product that requires a deep sense of trust between the
insured and the insurer – something often absent in many countries.13
Figure 4 below outlines the supply chain of microinsurance. The role of microinsurer has
been undertaken by a variety of actors, including governments, NGOs, CBOs and even
commercial insurers. The insurer designs the product, receives premiums and pays
claims, and of course, carries the insurance risk. The delivery channel, on the other hand,
is usually the frontline contact with policyholders in the local market; they perform the
12 Roth, J., McCord, M., Liber, D. 2007. The landscape of microinsurance in the world’s 100 poorest countries. The
Microinsurance Centre, April.
13 Schwarz, M. 2008. From microcredit to microinsurance. Review: Swiss Re Academy Alumni Magazine,
July 2008.
important tasks of selling the product and providing client service. In many
microinsurance schemes, MFIs have often been the typical delivery channel. Broker
activity is still very limited, while other alternative channels such as mobile phone firms,
utility companies and church groups are increasingly being utilized.14
Figure 4: The microinsurance supply chain
Source: Adapted by author from Roth, McCord and Liber, 2007.
Although still in a nascent stage, microinsurance has already shown the promise of
playing a significant role in reducing the vulnerability of low-income households to
economic shocks, thereby playing a key function in poverty alleviation.15 A 2007
landscape study that analyzed the presence of microinsurance in the world’s poorest
countries found that over 78 million persons were covered by microinsurance, although
Michael McCord, President of the Microinsurance Centre, stated that today the figure has
reached over 100 million.16 Microinsurance is indeed growing fast, and much of that
growth has been fueled by the private sector.
16 Interview with Michael McCord, President of the Microinsurance Centre LLC. Date: February 26, 2009 via
telephone.
1.3 Zurich Financial Services – Global Microinsurance Practice
Founded in 1872, Zurich Financial Services (ZFS) is an insurance-based financial services

firm, with over 60,000 employees and headquarters in Zurich, Switzerland. With a global
network of subsidiaries, offices and partners, Zurich serves customers in more than 170
countries across all continents.
Within the field of microinsurance, Zurich is one of the early movers among the large
global insurers. Through its microinsurance practice, Zurich aims to achieve dual
objectives: enhancing social development and reducing poverty by providing innovative
insurance products to disadvantaged, underserved populations in emerging economies,
while simultaneously accessing new markets and achieving a strategy for sustainable
financial growth. According to Zurich, “insurance allows the poor to weather shocks as
well as break from low-risk, low-reward strategies and as a result, put assets to more
productive use.”17 In order to broaden its knowledge of local communities and low-
income populations, Zurich has engaged in a public-private partnership with the SDG
and ILO. Additionally, Zurich partners with a variety of universities and research
institutions in order to perform market, product and distribution assessments.
Although its Global Microinsurance Practice was officially launched in January 2007,
Zurich has been active in this sector for over one decade through its various country
subsidiaries. Its first microinsurance program started in Bolivia in 1999. Currently,
Zurich is active in eleven countries spanning four continents. It offers its clients a wide
range of products, depending on the market. To reach its approximately one million
customers, it employs various formal and non-traditional distributions channels. Table 1
outlines the details of ZFS’s Global Microinsurance Practice.
17 Zurich Financial Services: Global Microinsurance Practice Factsheet, June 2008.

Table 1: ZFS’s microinsurance markets, products and distribution channels
Markets Products Distribution

South America General Insurance Financial Institutions
Bolivia Personal accident Microfinance banks
Brazil Personal property Commercial banks*
Chile Motor Credit unions
Mexico Legal protection
Venezuela Unemployment*
Asia Life and Health Retail
China* Credit life Grocery stores
Indonesia* Term life Clothing stores
Funeral
Health*
Hospital cash
Africa Services
Morocco Remittance*
South Africa Mobile phone*
Utility firms*
Newspaper
Europe Other
Russia* Direct-to-consumer
Turkey* Worksite
Network marketing*
Community-based*
* marked items are in early development Multinationals*
Source: Adapted from Zurich Global Microinsurance Practice Factsheet, June 2008.
Country context: the Republic of Moldova 9
2 Country context: the Republic of Moldova
2.1 Brief historical and cultural overview
The Republic of Moldova is a small, landlocked country situated in Eastern Europe

between northeast Romania and the Ukraine, just north of the Black Sea. Within its
approximately 33,700 square kilometers live about 4.2 million people, although the
resident population fluctuates between 3.5 and 4 million due to labor migration. The
majority of migrants leave Moldova in search of better job opportunities, the top
destination being Russia, particularly Moscow; Italy, Turkey and Spain are also target
destinations.18 Chisinau is Moldova’s capital and largest city, with a population of over
750,000. The only other city with a population over 100,000 is Balti, in the north.
The Prut and Nistru Rivers are not only Moldova’s main tributaries, but also its unofficial
cultural borders. Between the two rivers is what was formerly known as Bessarabia
(“Basarabia”) which is historically and culturally linked to Romania. Conversely, the area
east of the Nistru River was traditionally Slavic. During World War II, these two areas
were united, instigating a period of political and cultural strife that continues to this day,
to the detriment of both areas. Today, the area found between the Prut and Nistru is the
independent Republic of Moldova. To its east lies the de facto independent
Pridnestrovian Moldavian Republic – widely known as Transnistria – governed by a
Russophile separatist regime without official recognition from the international
community.
Moldova has its Latin roots from its ties to the Roman Empire. It has a history peppered
with cultural conflicts and influences from the Russians, Romanians, Greeks, Turks,
Germans and others. Present-day Moldova was seized by the Russian Empire in the early
1800s. After the culmination of World War I, Moldova briefly declared its independence,
but shortly after, united with Romania. It became engulfed again into the USSR after
World War II, which ushered in a period marked by a momentous campaign of
Sovietization.
This era came to an end when the Iron Curtin fell in the late 1980s. After holding its first
free elections, Moldova originally declared its independence from the Soviet Union in
1990, which became official on August 27th, 1991. However, the early days of sovereignty
were bumpy, characterized by severe political strife within its borders: firstly, the
18 Luecke, M., Mahmoud, T.O., Steinmayr, A. 2008. Labor migration and remittances in Moldova: Is the boom
over? International Organization for Migration, February 15.
Turkish-Christian region of Gagauz, in the southern region of Moldova, declared

autonomy – granted to them in August of 1990. In the autumn, Transnistria unilaterally
separated from Moldova, sparking a short but bloody civil war later in 1992.
Although Moldova heavily struggled to gain its independence, it ironically became the
first post-Communist country to elect a Communist president: Vladimir Voronin was first
elected in 2001 and then re-elected in 2005 and 2009. The last re-election of the
Communist party in April of this year was heavily criticized by opponents, and sparked
violent protests in the capital. However, hopes for the next Rose or Orange Revolution
did not materialize.19
Today, almost 80 percent of the population is comprised of ethic Moldovans, who share
the Romanian culture and language which was greatly influenced by the Eastern
Orthodox religion. Significant and influential minority groups hail from Moldova’s
neighbors, with Ukrainians comprising 8.4 percent of the population and Russians
comprising 6 percent. The official language is Moldovan, essentially identical to
Romanian. Sixteen percent of the population uses Russian as their first language, and
Russian-Moldovan bilingualism is characteristic of the country.20
Moldova gained international recognition upon the publication of Eric Weiner’s 2008
bestseller, “The Geography of Bliss,” in which the author traveled throughout the world
to find and rank the happiest countries. Moldova ranked as the unhappiest place in the
world.21 The World Database of Happiness in the Netherlands also ranks Moldova
consistently near the bottom rung of countries.22 This is most likely due to the enormous
instability that characterized its early years of independence when Moldova was plagued
by corruption, plummeting incomes and living standards, soaring unemployment and
other economic and political maladies. Table 2 below provides a demographic overview
of Moldova.
19 Cashu, I. 2009. Analysis: Why an orange revolution is not likely in Moldova. Radio Free Europe.
www.rferl.org. Retrieved April 2009.
20 “Conceptia politicii nationale a Republicii Moldova”. www.parlament.md/download/laws/ro/546-
XV.19.12.2003.doc Moldovan parliament officicial website.
21 Weiner, Eric. 2008. The geography of bliss: One grump’s search for the happiest places in the world.
Twelve Books: January.
22 The World Database of Happiness. www.worlddatabaseofhappiness.eur.nl. Retrieved April 2009.
Table 2: Demographic overview of Moldovan population
Item Value Year Source

Population 4.324 million July 2008 CIA
Population density 121.9 2006 United Nations

(per km2)
Population growth rate -0.092 percent 2008 USA CIA
Population below poverty 29.5 percent 2006 UN Human

line Development Report
Percentage rural/urban 2006 UN Human
Urban 46 percent Development Report
Rural 54 percent
Adult literacy rate 99.1 percent 2006 UN Human
Development Report
Internet users 727,000 (17%) 2007 USA CIA
Number of TV stations 94 2008 Moldovan Statistical

Bureau
Number of radio stations 55 2008 Moldovan Statistical
Bureau
Telephone landlines 2008 Moldovan Statistical
Urban 41 percent Bureau
Rural 23 percent
Mobile phones 1.88 million 2008 Moldovan Statistical
(52.7 percent) Bureau
2.2 Economic and political environment
Moldova is a parliamentary democracy, with a president who serves as the head of state,
and a prime minister who is the head of government. Moldova currently participates in a
plethora of international organizations, including the WTO, UN, IMF, ILO, IFC, World
Bank, Interpol and WHO. It also aspires to EU accession, and in pursuing this goal, has
transformed its economy into a more liberalized, market-oriented one. Recently, Moldova
lowered corporate income tax to 0 percent, among the lowest in the world.23
The Communist Party, in control since 2001 and re-elected twice, is often criticized for
being slow to liberalize the economy. According to several international organizations,
including the World Bank and IMF, the state maintains controls over some banks,
insurance companies, as well as several television and radio channels.24 The lack of
settlement with Transnistria is controversial as well as economically and politically
23 Piatkowski, M. & Jarmuzek, M. 2008. Zero corporate income tax in Moldova: Tax competition and its
implications for Eastern Europe. IMF Working Paper, August.
24 IMF. 2008. The Republic of Moldova – Financial Sector Assessment. World Bank-IMF: August.
damaging, since the region contains the majority of Moldova’s industry. In addition,
corruption is still rampant, with Moldova scoring 2.9 out of 10 on Transparency
International’s 2008 Corruption Perceptions Index.25
Moldova’s economy is in a fragile state. With a per capita income of approximately $2,500
(PPP), it is consistently ranked as one of the poorest countries in Europe. About 30
percent of the population lives in poverty, earning less than $2 per day (PPP). 26 About 90
percent of the population lives on about $10 per day (PPP).27 In the UN’s Human
Development Index, Moldova’s score was 0.708, ranked as 111 out of the 177 countries
th
captured.28 In addition, the US-based think tank Fund for Peace gave Moldova a score of
85.7 on its Failed State Index of economically and politically unstable countries, the lowest
score received by any European nation.29
According to an interview with the IMF Chief of Mission to Moldova, the public sector
contributes approximately 30-40 percent of the GDP; in most developing countries, this
figure falls within the 15-20 percent range. It is over-reliant on agriculture, with an
additional 30-40 percent of the GDP stemming from this sector. This leaves the entire
private sector to contribute the remaining 20-30 percent – mostly driven by domestic
consumption (in turn driven by remittances), rather than production. Moldova is, in fact,
ranked as the country most heavily dependent on remittances, which constitute almost
one-third of its GDP.30 Moreover, the government’s budget is heavily dependent on
imports – 80 percent of its revenues originate from VAT (value added tax) and other
import taxes (in other countries, this figure is about 15-25 percent).31 Unfortunately, this
sometimes signifies that Moldova imports products it already produces domestically.32
Moldova’s economy has a large trade deficit and is heavily dependent on its large
neighbor, Russia – who is both its largest export partner as well as the largest importer of
Moldovan products. Equally significant is that Moldova gets most of its energy supply
from Russia. Evidently, Moldova often finds itself at the mercy of the whims of the
Russian government. Two prominent examples both occurred in 2006: firstly, Gazprom
25 Transparency International. www.transparency.org. Retrieved February 2009.

26 World Bank. 2006. Moldova: Poverty Update.
27 World Bank PovcalNet, online poverty analysis tool. www.worldbank.org Retrieved April 2009.
28 The HDI serves as an additional measure which incoprates a broader definition of well-being, including
health, education and standard of living. United Nations Development Programme. www.undp.org.
Retrieved April 2009.
29 Fund for Peace website. www.fundforpeace.org. Retrieved April 2009.
30 Luecke, M., Mahmoud, T.O., Steinmayr, A. 2008. Labor migration and remittances in Moldova: Is the boom
over? International Organization for Migration, February 15.
31 Interview with Johann Mathisen, Chief of Mission to Moldova, IMF. Date: March 23rd, 2009 in Chisinau,
Moldova
32 Interview with Roxana Savescu, Assistant Professor at Lucian Blaga University in Sibiu, Romania, and
microfinance consultant. Date: March 23rd, 2009 via telephone.
discontinued the energy supply to Moldova and refused to reinstate it until the
government paid double the previous prices. During the same time period, Russia
stopped importing Moldovan wine leaving thousands without income – a move many
speculated served as punishment for Moldova’s break with Moscow.33 Additionally,
Moldova has mounting external debts, estimated at over $4 billion as of December 31st,
2008.34 The IMF recently named Moldova a Heavily Indebted Poor Country (HIPC), the
first European country in history to have this status.
Like much of Eastern Europe, Moldova experienced an economic boom in recent years,
mainly fueled by FDI, increased access to credit and increased consumption due to the
heavy inflow of remittances. 35 Growth has averaged over six percent per year. Now, the
reversal of growth is expected as the economy experiences contractions. At the onset of
the economic crisis in mid-2008, Moldova was relatively shielded from the impacts due to
a low level of internationalization. However, significant reverberations began later in
2008 as the crisis spread and deepened.36
The current economic outlook for not only Moldova, but the entire CIS region, is not
good.37 FDI will decrease, as will exports due to decreased international demand.
Meanwhile, imports will also decline as domestic demand drops as remittance inflows
tumble – leading to a government budgetary crisis. As jobs disappear, emigrants will
return from abroad, creating a jolt in the domestic labor supply, which will most likely
lead to higher unemployment and lower wages in the formal economy. Table 3 below
offers a glimpse of Moldova’s macroeconomic indicators.
33 BBC World News. Russian wine move draws protests. www.bbc.co.uk. Retrieved February 2009.
34 CIA World Factbook 2008. www.cia.gov/library. Retrieved February 2009.
35 World Bank Country Brief 2007, January 2008. Retrieved February 4, 2009.
36 Interview with Johann Mathisen, Chief of Mission to Moldova, IMF. Date: March 23rd, 2009 in Chisinau,
Moldova
37 IMF. 2009. World Economic Outlook – Crisis and recovery. IMF Report, April.
Table 3: Macroeconomic overview of Moldova
Item Value Year Source

GDP (PPP) $10.7 billion 2008 USA CIA
GDP per capita (PPP) $2500 2008 USA CIA
GDP real growth rate 5.7 percent 2008 USA CIA
GDP (nominal) $6.1 billion 2008 IMF
GDP per capita (nominal) $1,800 2008 IMF
Annual inflow of FDI 7 percent 2006 UN Human

percent of GDP Development Report
Inflation rate 7.5 percent 2008 USA CIA
Remittances as percent GDP 30.5 percent UN Human

Development Report
Exchange rate per US dollar 11.48 MDL May 2009 www.oanda.com
Labor force 1.2 million 2008 Moldovan Statistical

Bureau
Unemployment rate 7.4 percent 2008 Moldovan Statistical
Bureau
2.3 Health in Moldova
According to the WHO, Moldova previously had one of the most wide-ranging healthcare
networks not only in Europe, but in the world. Sadly, in the early days of independence,
there was a marked deterioration in the health care system and consequently, in the
health of the population. This deterioration was primarily due to the political and
economic instability Moldova faced during the 1990s, which led to severe reductions in
state healthcare expenditures. Numerous hospitals and clinics were subsequently closed,
leaving thousands of Moldovans without proper access to quality healthcare. In the last
few years, Moldova has implemented compulsory health insurance, which is discussed
further in section 3.2.4.
Currently, Moldova has one of the lowest life expectancy in Europe, with an average of 68
years.38 Communicable diseases, such as tuberculosis, viral hepatitis and HIV/AIDS,
contribute significantly to morbidity and mortality rates. Poor health care has also
negatively affected infant and maternal mortality rates and has led to an increase in
noncommunicable diseases. Another widespread concern is the increased prevalence of
lifestyle-related conditions: excessive alcohol consumption, smoking, unhealthy diet and
38 World Health Organization, Country Cooperation Strategy Report, 2006. www.who.org. Retrieved
February 7th, 2009.
obesity all contribute to the mortality burden. 39 Additional health data can be found in
tables 4 and 5 below.
Table 4: Health statistics overview of Moldova

Item Value Year
Life expectancy at birth 68 years 2006
Male 64 years 2006
Female 72 years 2006
Infant mortality 16 2006
(per 1000 live births)
Under 5 mortality 19 2006
(per 1000 live births)
Maternal mortality 36 2006
(per 100,000 live births)
Adult mortality 237 2006
(Between 15-60 years, per 1000)
Health expenditures 2004
as % of GDP 7.5 percent
as % of government 11.3 percent
expenditures
Source: Adapted from the WHO World Health Statistics 2008 Report and the WHO 2006 Country
Factsheet for Moldova
Table 5: Top causes of death in Moldova

Cause of death Percent
Cardiovascular diseases 55.8
Cancer 12.6
Digestive system diseases 10.2
Accidents, poisoning 8.7
Respiratory system diseases 6.1
Other 6.6
Source: Adapted from the Statistical Bureau of Moldova, 2007, www.statistica.md.
2.4 Climate and natural disasters
With a temperate continental climate, Moldova’s terrain of rolling steppe, farmland and
woodland lends itself to excellent agricultural conditions. Moldova, like its neighbor
Romania, has a long-standing agricultural tradition, and today, agriculture employs about
40 percent of the population and contributes more than 30 percent of the GDP.40
Approximately 70 to 80 percent of the total land surface area is cultivated, and it is a well-
known regional wine producer.
39 World Health Organization, Country Fact Sheet 2006. www.who.org. Retrieved February 7th, 2009.
40 CIA World Factbook, 2008. www.cia.gov/library Retrieved January 28, 2009.
Despite these fortuitous conditions, there are several environmental concerns: Soil and
water were contaminated throughout the 1980s and 1990s due to the liberal use of
agricultural chemicals, such as now-banned DDT. Additionally, soil erosion is quite
extensive as a result of poor farming methods.
Moreover, Moldova is quite susceptible to natural disasters that can devastate cropland,
mainly earthquakes, landslides, drought and flood. According to the 2009 AXCO
Insurance Market Report on Moldova, some insurers consider flood as the primary
natural hazard.41 The risk of flood is exacerbated by the 3,000 small dams built
throughout the Moldovan countryside to help irrigate cropland. These dams are
vulnerable to damage from earthquakes as well as from overflow due to heavy rains.
Several incidences have occurred over the last two decades, including in 1994, 2003, 2005
and 2006. In the summer of 2008, the Prut and Nistru Rivers severely flooded due to
torrential rains, resulting in another $120 million in damages, 15 percent ($18 million) of
which were attributed to agricultural losses. Out of the 4.5 million hectares that were
destroyed, over 20 percent belonged to small local farmers.42
In addition to floods, earthquakes in Moldova stem from its proximity to the Vrancea
subduction zone in Romania, where high magnitude earthquakes usually occur every 30
to 40 years. The last two major earthquakes were in 1977 and 1990. Both earthquakes and
heavy rains can instigate landslides and cause extensive damage. One of the last major
landslides was in 1999, where over 140 towns and villages were affected and over 36
million MDL of losses were incurred. According to the AXCO report, little or no records
of insured losses exist for any of the aforementioned natural disasters.43
In light of global climate change, the World Bank and others organized a strategic project
to address climate change and natural risks. One of the objectives is to develop and
implement an insurance against natural disasters. However, the project proposes seeking
resources for this agricultural insurance fund from the EU, and not from, for example,
Moldova’s own insurance market.44
41 AXCO Insurance Market Report: Moldova Non-life (P&C), 2009.

42 ARS Assecuratiorum Insurance Magazine, December 2008. Retribution for ignorance.
43 AXCO Insurance Market Report: Moldova Non-life (P&C), 2009.
44 ARS Assecuratorium Insurance Magazine, December 2008. Agricultural Insurance.
Supply: The insurance industry in Moldova 17
3 Supply: The insurance industry in Moldova
3.1 Industry overview
A sentiment of excitement surrounds the current insurance market in Moldova. In the

last three years, there has been a marked consolidation among insurance firms and
brokerages while total premiums have steadily increased (figure 5 below).
Simultaneously, there has been an explosion of activity concerning trade associations and
industry-specialized publications, which signify the dynamic nature of the market. A
driving factor of these changes is the 2006 insurance legislation that increased minimum
capital requirements and outlined a plethora of regulations that is helping raise
Moldova’s market to international standards. That same year, a gathering of insurance
firms and supervisory authorities created the first symbol of the Moldovan insurance
industry, seen in Appendix 3, with the slogan, “Egali, Eterni, Solidari” (equality, eternity,
solidarity).45
Figure 5: Insurance market premiums, 2002-2008
73.9
USD millions
64.2
41.6
28.5 31.3
19.8
15.8
2002 2003 2004 2005 2006 2007 2008
Source: The National Commission on Financial Markets website. www.cnpf.md.
Despite this progress, Moldova’s insurance market is one of the smallest in Europe. Both
the insurance density and insurance penetration imply that the Moldovan market is still
underdeveloped. Firstly, insurance density provides a good measure of insurance activity
in a nation, and is measured as the annual insurance premiums per capita. For 2008, the
insurance density was 192 MDL ($17.10), indicating very low activity in the market. In
most western countries, this figure ranges from $2,000 to $6,500. Even in many Eastern
45 ARS Assecuratiorum Insurance Magazine, December 2008. The symbol: A fundamental attribute.
European countries, densities are much higher: Romania had $94.50 in 2006, while the
Ukraine had $59.60.46
Insurance penetration, a good measure of an insurance market’s strength, is equivalent to

total insurance premiums as a percentage of the nominal GDP. In 2008, penetration was
only 1.2 percent (with 833.2 million MDL - $73.9 million in premiums underwritten). For
comparison, the insurance penetration in most western countries is between 7 and 15
percent. Moldova’s figures are low even in comparison to its neighbors; Romania and
Bulgaria, had penetration rates of 1.7 and 2.3 percent respectively.47
The insurance authority in Moldova, the National Commission on Financial Markets

(CNPF), separates insurances into four categories: compulsory insurances, and three types
voluntary insurances: goods, personal and accident, and professional indemnity. Table 6
below outlines key figures of the Moldovan insurance market.
Table 6: 2008 key figures of the Moldovan insurance market
Product category Total premiums* Insurance density Insurance

penetration
Compulsory 336.8 million MDL 77.90 MDL 0.5%
($6.91)
Voluntary, goods & 333.1 million MDL 77.0 MDL 0.5%
property ($6.83)
Voluntary, personal & 114.7 million MDL 26.50 MDL 0.17%
accident ($2.35)
Voluntary, 48.6 million MDL 11.2 MDL 0.05%
professional indemnity ($1.00)
TOTAL 833.2 million MDL 192.70 MDL 1.2%
($17.10)
* Figures have been rounded to the nearest .1
Source: National Commission on Financial Markets. www.cnpf.md.
Microinsurance is a mostly unknown concept in Moldova. There is no specific

microinsurance legislation, although the government has expressed interest in developing
specific legislation in the future. Although no microinsurance products exist, some
current products, such as property and credit life, are relatively affordable and accessible
for lower-income persons.
The remainder of the chapter will outline the various actors present in the Moldovan
insurance industry. Understanding their history and activities will provide a better
understanding of the current status and future potential of the insurance (and
microinsurance) industry in Moldova. Firstly, the role of government will be discussed,
46 Swiss Re Reinsurance Company website. www.swissre.com. Retrieved April 2009.

47 Swiss Re Reinsurance Company website. www.swissre.com. Retrieved April 2009.
including the insurance regulatory environment and pertinent legislation. Secondly, the
role of insurance trade associations, as well as the new insurance publications, will be
outlined. Subsequently, an overview of the several insurance firms will be given,
followed by a look at select insurance products, and finally, distribution channels and
marketing.
3.2 The role of government in insurance

3.2.1 The National Commission on Financial Markets
The National Commission on Financial Markets (“Comisia Nationala al Pietei Financiare,”

CNPF) is the autonomous authority responsible for the oversight and administration of
the nonbanking financial sector in Moldova, including insurance firms and brokers,
pension funds, securities issuers and microfinance providers. Mr. Mihail Cibotaru has
been the Chairman of the Commission since its inception in July 2007. Theoretically, the
CNPF is an independent and self-financing organization. Nevertheless, a joint World
Bank-IMF report from March 2008 raised questions whether this was, in fact, the case.48
Commercial banks are supervised by a separate authority, under the jurisdiction of the
Ministry of Finance.
The CNPF was created according to law nr. 129-XVI of June 6th, 2007, which consolidated
the following three regulatory offices under one jurisdiction: the National Commission on
Securities; the State Office for Insurance Supervision and Pension Funds, and the State
Supervision Office of Savings and Credit Associations. These three now constitute the
main departments of the commission. The CNPF currently has over 110 employees,
including two regional offices. An organizational chart can be seen below in figure 6.
48 World Bank-IMF. 2005. Moldova: Financial sector assessment. World Bank-IMF Financial
Sector Assessment Program (FSAP), March.
Figure 6: Organizational structure of the CNPF
The mission of the CNPF is to authorize and regulate the activities of market participants
in order to ensure the stability, transparency and efficiency of the financial sector in
Moldova, and to protect the interests of citizens and investors. All decisions are made by
the five-member Administration Council (“Consiliul de Administratie”) who meets on a
weekly basis. According to Veronica Cuhal, Advisor to the Council President, the
Council’s guiding principle and goal is to conform the CNPF’s structure, activities and
legislation to international standards.49 The CNPF is in the process of applying to the
International Association of Insurance Supervisors (IAIS), with expectations of becoming
an official member in fall 2009.50
The CNPF is presently implementing a collaborative program with the World Bank, with
the objective of strengthening institutional capacities and improving operational
efficiency. The project’s action plan includes a national PR campaign for financial
services, including insurance, launching later in 2009. The campaign, whose goal is to
49 Interview with Veronica Cahul, Advisor to the President, National Commission on Financial Markets.
Date: March 20, 2009 in Chisinau, Moldova
50 Founded in 1994, the IAIS promotes international supervision standards in over 130 member countries; its
goal is to contribute to global financial stability and support the development of well-regulated insurance
markets. IAIS website. www.iaisweb.org. Retrieved March 29, 2009.
raise awareness among the general population, will include TV spots, radio, print
advertising, and brochures for mass distribution.51
3.2.2 The Department of Insurance Supervision
The State Office for Insurance Supervision (“Serviciul de State pentru Supravegherea
Asigurarilor”) was first instituted within the Ministry of Finance on June 12th, 1991 (law
nr. 296). Law nr. 1508-XII from June 15th, 1993, established the principles and guidelines
by which the Office would operate. The Office was engulfed by the CNPF in July 2007.
The current Department of Insurance Supervision (DIS) is headed by Mr. Vladimir Stirbu
and has a staff of 17 persons. There are two subdivisions: the first approves premium and
policy terms and conditions, and also grants licenses for insurers and intermediaries. The
second is the directorate for monitoring and controlling, which ensures that firms meet
the minimum capitalization and solvency requirements, and operate in accordance with
the law.
3.2.3 Insurance legislation
In October 1992, Moldova passed its first insurance law, later amended in 1996. The next
milestone for general insurance legislation was in December 2002. One of its main
stipulations was the increase of the minimum capital prerequisite from 300,000 MDL to 2
million MDL ($26,600 to $177,500). Another provision outlined that all insurance agents
and brokers required a license. However, these two intermediaries were still not legally
differentiated and no minimum capital requirements existed for opening an insurance
brokerage.52 In addition, foreign insurance firms were given permission to fully own a
subsidiary in Moldova (previously capped at 49 percent), but were not allowed to
establish branches.
A significant turning point for the insurance industry was in 2006, when law nr. 407-XVI
of December 21st, was passed. Its intention was to bring the Moldova’s insurance sector in
line with international standards.53 One of its main provisions separated the market into
life and general (non-life) insurance. Firms have been given the mandate to separate their
activities by 2012. The law raised the minimum capital requirements for all new insurers:
15 million MDL ($1.3 million) for general insurance, 22.5 million MDL ($2 million) for life,
and 30 million MDL ($2.7 million) for reinsurance. Present insurers, however, have until
51 Interview with Andrei Darie, Head of External Relations and European Integration, National Commission
on Financial Markets. Date: March 20, 2009 in Chisinau, Moldova.
52 Interview with Roman Gutu, Founder and former President, Asigest Insurance Brokers. Date: March 24th,
2009 in Chisinau, Moldova.
53 Interview with Oleg Verejan, President of AAM. Date: March 25th, 2009 in Chisinau, Moldova.
2012 to meet these requirements, but must reach the capitalization increase on April 6th of
each year. This particular provision has already produced a consolidation within the
Moldovan insurance market. In 2008, the minimum was increased to 4 million MDL
($355,000), which resulted in four of the 33 existing firms to lose their operating licenses.
For 2009, firms had to satisfy a 6 million MDL ($532,000) minimum.
In addition, the law finally legally distinguished between agents and brokers. Both were
required to fulfill minimum professional qualifications and to obtain a license from the
DIS. Brokers also must meet a minimum capital requirement of 25,000 MDL ($2,200).54
The law was also the first in Moldova to regulate the actuarial profession. Before 2006,
there was no mention of actuaries in the legislation, and the Office of Insurance
Supervision did not have one actuary among its ten employees, who oversaw over 50
firms at the time. Only one company, ASITO, had an actuary because it was then owned
by Australia’s QBE Group. Today, only two other firms besides ASITO have actuaries,
Austrian-owned Grawe Carat and life insurer Sigur-Asigur. One of the law’s provisions
is that as of April 6th, 2007, all life insurance firms are obligated to utilize actuarial services
while non-life insurance firms have until April 6th, 2012 to implement this practice.55
3.2.3.1 Microinsurance legislation
There is no specific microinsurance regulation. However, Vladimir Stirbu confirmed that

the DIS is open to proposing specific microinsurance legislation and is interested in
developing microinsurance in Moldova. However, the department currently has both
financial and personnel constraints, and would therefore necessitate external support in
order to proceed. Mr. Stirbu also shared that he received a letter from the World Bank
earlier this year which included the “Insurance for the Poor” booklet written by Olivier
Mahul, which was his first introduction to the concept.56
3.2.3.2 Compulsory insurances
The 2006 insurance law also differentiated between compulsory and voluntary
insurances. Currently, there are 12 types of compulsory insurances in Moldova, listed in
Table 7 below.
54 National Commission on Financial Markets website. www.cnpf.md. Retrieved March 2009.

55 National Commission on Financial Markets, legislative acts. Law regarding insurance, nr. 407-XVI,
December 31, 2006. www.cnpf.md. Retrieved April 8, 2009.
56 Interview with Vladimir Stirbu, Director of Insurance Supervision Department, National Commission on
Financial Markets. Date: March 26, 2009 in Chisinau, Moldova.
Table 7: Listing of compulsory insurances
Insurance Law Date enacted

Motor third party liability Law nr. 414-XVI December 22nd, 2006
Professional indemnity for notaries Law nr. 1453, article 12 November 8th, 2002
Professional indemnity for insurance Law nr. 407-XVI December 21st, 2006
brokers
Professional indemnity for auditors Law nr. 61, article 9 March 16th, 2008
Professional indemnity for quality Law nr. 186, article 21(2) April 24th, 2003
controllers
Third party liability for hazardous Law nr. 803 February 11th, 2000
chemicals
Personal accident for passengers on public Law nr. 1553 February 25th, 1998
transportation
Traveler insurance through tourist agencies Law nr. 798 February 11th, 2000
Life and health insurance for clinical trial Law nr. 1409 December 17th, 1997
participants
Insurance of leased goods Law nr. 59, article 7 April 28th, 2005
Insurance for collateral used in banking Law nr. 142, article 22 June 26th, 2008
transactions
Insurance for securities guarantees Law nr. 199, article 18 November 18th, 1998
Source: Adapted from Cernica, Veaceslav. The palette of obligatory insurances. ARS Assecuratiorum
Magazine, February 2009.
Evidently, most insurers want the government to legislate additional mandatory

insurances, particularly property and agricultural insurance.57 When asked whether he
expects the government to pass more legislation mandating insurance, Mr. Stirbu
disclosed that a proposal for mandatory property insurance is currently under review but
will likely be rejected, as it was in Romania. Mr. Stirbu explains that mandatory
insurance is difficult to promote to the public and therefore difficult to pass through
legislation.
57 Cernica, Veaceslav. The palette of obligatory insurances. ARS Assecuratiorum Magazine, February 2009.
3.2.4 The National Health Insurance Company
Health insurance is the primary form of insurance where the government plays a
significant role in Moldova. Law nr. 1585-XIII of February 27th, 1998, outlines the
provision of mandatory health insurance for all citizens. Law nr. 950 from September 7th,
2001 created the National Health Insurance Company (“Compania Nationala de Asigurari
in Medicina,” CNAM), a government-run non-profit organization that administers and
manages the state-subsidized medical insurance system. Through the CNAM, coverage
includes a variety of services, including maternity, pediatrics and urgent care, as well as a
limited number of pharmaceuticals (usually, just the essentials).
Through this system, a patient is assigned to a family doctor and a selection of hospitals,
all organized on a territorial basis. The family doctor is the first stop and intermediary for
all medical services. For instance, the family doctor receives monthly “coupons” for
diagnostic and laboratory tests, which in turn are literally rationed out to patients.
Evidently, this can lead to long waiting times. If a patient visits a doctor or institution
outside of their designated territory, the insurance is rendered invalid and the patient is
responsible for all charges.
Payment of the insurance depends on employment status. If employed in the formal

economy, a certain percentage of the employee’s monthly salary is allocated from each
salary for the CNAM, according to law nr. 1593-XV of December 26th, 2002; the employer
and employee split this amount. This percentage has successively increased over the
years: from two percent (each) for 2004 through 2006; 2.5 percent for 2007; three percent
in 2008 and 3.5 percent in 2009.
If self-employed, or employed within the informal economy, one must purchase the
insurance policy by applying directly at a CNAM branch. The cost for 2009 is 2,637.6
MDL ($250), to be paid in full. From January 1st to March 31st of every year, however, the
CNAM usually offers half-price promotions.58 Although this is likely implemented to
serve as an incentive, it does not always produce the intended consequence. According to
public health specialists at the Soros Foundation, many lower-income people simply do
not purchase the insurance unless they fall ill throughout the year.59 At that point, they
must first undergo a complicated application process, including a health examination.
Furthermore, the price discount is lost – a penalty which exists precisely because the
government wants to discourage such reactive use of the policy.
58 National Company of Medical Insurance (CNAM) Website. www.cnam.md Legislation regarding the
2009 funds for obligatory health insurance, law nr. 263-XVI from December 11, 2008.
59 Interview with Liliana Gherman, Program Director, Public Health Program; Ana Capcelea; Vitalie
Slobozian. Soros Foundation of Moldova. Interview date: March 17, 2009 in Chisinau, Moldova.
Only approximately 67 percent of the population in Moldova actually subscribe to the

mandated state insurance.60 Many without formal employment choose not to subscribe
for various reasons, but lack of money is usually one of the driving factors.61 Critics
maintain the system is inefficient and not of particularly high quality. According to Mr.
Ion Cebotari of Moldasig Insurance Company, “many people are not only dissatisfied, but
indignant about this system.”62
3.2.5 State-subsidized agricultural insurance
The government of Moldova has subsidized agricultural insurance since 2004, when the
Law nr 243-XV of July 8th was passed. The crops subsidized (plus livestock and animals),
the risks covered (e.g. flood, drought, frost), and the percentage of government
contribution, is decided annually. For both 2007 and 2008, the Ministry of Agriculture
and Food Industry (MAFI) subsidized 80 percent of the coverage, while the remaining 20
percent was paid by the insured. Due to the financial crisis, the subsidies were lowered
for 2009: 60 percent for certain primary crops and 50 percent for the remaining crops and
livestock. (Ukraine, for example, cancelled all agricultural insurance subsidies for 2009
because of the crisis).63
Two firms are sanctioned to sell the state-subsidized policies: Moldasig (with
approximately 65 percent market share) and MOLDCARGO (35 percent market). Both
basically serve as intermediaries between the state and the insured party. The annual cost
is based on total land surface area, type of crop(s), average yield over the previous three
years, and the average market price of the crop. The applicant selects the risks for which
coverage is desired, which are paid à la carte. The tariffs differ for each risk, and are
established in advance by the Ministry of Agriculture. For example, a more expensive
risk is drought, where the premium is equivalent to six percent of the insured amount;
flooding is less expensive, with premiums equivalent to 0.2 percent of the insured value.
It is important to note that the legislation only offers subsidies to incorporated entities,
like farm cooperatives – not to individual farmers. Individuals can still voluntarily
purchase agricultural insurance, but must fully cover the costs themselves. As Mr. Ion
Buza of MOLDCARGO diplomatically stated, “It is just not convenient. Basically, the
costs are high relative to rural incomes, and if the insurance is voluntary, people choose
not to insure.”64 Other firms, including Grawe Carat and Donaris, offer voluntary
60 National Company of Medical Insurance (CNAM) 2007 Annual Report.

Slobozian. Soros Foundation of Moldova. Interview date: March 17, 2009 in Chisinau, Moldova.
62 Interview with Ion Cebotari, Manager of the Supplementary Medical Insurance Department, Moldasig.
Interview date: March 19, 2009 in Chisinau, Moldova.
63 ARS Assecuratiorum Magazine, February 2009.
64 Interview with Ion Buza, Manager of the Agricultural Insurance Department, Moldcargo. Date: April 14,
agricultural insurance, but rarely effectuate more than a few contracts per year. For
example, even at Moldasig, 90-95 percent of agricultural insurance premiums are from
incorporated entities.65
According to statistics from the MAFI, only one percent of all agricultural surface area is
insured.66 In 2008, the total premiums collected were 45 million MDL, with the Ministry
subsidizing 36 million MDL (80 percent). 13.1 million MDL (29.1 percent) was paid in
claims.67
3.3 Insurance trade associations

The organization of firms into trade associations is an indication that a certain level of
professionalism exists within an industry. Until 2008, Moldova had no insurance trade
associations. The only insurance-related organization was the National Office of
Automobile Insurers, which is rather a local service office for the International Green
Card System.
However, 2008 witnessed the emergence of three insurance organizations, most notably
the Moldovan Union of Insurance Providers. All are in an incipient stage, yet each has
outlined a detailed action plan with ambitious objectives that will contribute to the
development of the insurance industry in Moldova. Although none of these plans include
microinsurance, most of them do include plans to invest resources in raising the
awareness and knowledge of the population about insurance. A summary of the four
associations and their respective missions and activities will be outlined below.
3.3.1 The Moldovan Union of Insurance Providers
In October 2008, Capital Market Magazine (a publication of the CNPF), announced the
establishment of the Moldovan Union of Insurance Providers (“Uniunea Asiguratorilor
din Republica Moldova” (UAM). As Alexei Toporov, Director of Garantie Insurance
Company, stated in December 2008, “The need for such as association is long overdue.
The creation of the UAM is one of the most significant events in insurance of 2008.”68
The UAM was originally founded by three insurance firms: Moldova-Astrovaz, Sigur-
Asigur and Victoria Asigurari. Currently, 14 of Moldova’s 29 insurance firms are
members, who collectively possess 80 percent market share and who each have an equal
2009 via telephone.

65 Interview with Oleg Galbura, Manager of the Agricultural Insurance and Risk Department, Moldasig.
Interview date: March 19, 2009 in Chisinau, Moldova
66 MAF of Moldova. www.maia.gov.md. Retrieved March 2009.
67 National Commission on Financial Markets. www.cnpf.md. Retrieved March 2009.
68 Petrenko, Dmitrii. Garantie: Fifteen years on the Moldova insurance market – an interview with Alexei
Toporov. Capital Market Magazine, DATE. www.capitalmarket.md.
voice in the new association.69 The UAM hopes to attract the remaining insurance firms
into the association, as it believes that it can only reach its full potential when all
stakeholders are represented.70 Its mission is to create a transparent insurance market and
to promote the interests of all sector participants. The organization’s president is Dr.
Mihail Manoli, who has held a variety of positions, including Insurance Supervisor,
Minister of Finance, and Representative of Moldova at the IMF and World Bank.
At the general assembly meetings of December 17th and 24th, 2008, the UAM outlined a
detailed plan of activities for the new year. The plan includes about 45 tasks and
objectives to help tap into the underdeveloped potential of Moldova’s growing insurance
market. In a January 2009 interview, Dr. Manoli stated that the implementation and
success of this plan would signify great progress for the insurance sector of Moldova.71 A
selection of the plan’s key points is outlined in figure 3 in Appendix 2.72
3.3.2 The Actuary Association of Moldova
The Actuary Association of Moldova (“Asociatia de Actuariat din Moldova,” AAM) was
officially founded on January 29th, 2007 and actively began activities in 2008. Its mission is
the representation, support and promotion of the actuary profession in Moldova. Two
short-term goals include creating a specialized research and training institute, and
establishing a professional code of ethics.73 Furthermore, the AAM has been an associate
member of the International Actuarial Association (IAA) since October 2007. 74 The AAM
recently launched its website, www.actuariat.org.md, which remains under development.
Currently, the AAM has eleven members. Its president, Dr. Oleg Verejan also serves as a
member of the Expert Advisory Council to the CNPF. Dr. Verejan explains that it is
difficult to find specialized and interested people to join the association, especially in
Moldova where there is little educational infrastructure for actuaries.75 It is a cycle that
originates from the very low awareness in Moldova that the actuarial profession exists –
even within the insurance industry.76 His goal is to develop the AMM and help elevate
the actuarial profession in Moldova to international standards. In the fall of 2008, the
69 ARS Assecuratiorum Magazine. A Dedicated Leader: Interview with Mihail Manoli. February 2009 issue.
70 ARS Assecuratiorum Magazine. A Dedicated Leader: Interview with Mihail Manoli. February 2009 issue.
71 Tudoreanu, Ghenadie. The Moldovan Union of Insurance Providers outlines their 2009 objectives. Capital
Market Magazine, January 28, 2009. www.capital.market.md. Retrieved April 6, 2009.
72 Adapted from the Moldovan Union of Insurance Providers, Plan of Activities 2009. Approved on
December 24, 2008 at the General Assembly Meeting, verbal process nr. 3
73 The International Actuarial Association website. www.actuaries.org. Retrieved April 8, 2009.
74 The IAA is a global umbrella organization originally founded in 1895, whose mission is to support the
worldwide development of the actuarial profession through research, training and support of national
associations. The IAA website. www.actuaries.org. Retrieved April 2009.
75 Interview date: March 25, 2009 in Chisinau, Moldova.
76 The Actuary Association of Moldova website. www.actuariat.org.md. Retrieved March 28, 2009.
AAM drafted a proposal of recommendations to the CNPF which was subsequently

approved; the AAM is now collaborating with the DIS for the implementation phase.
3.3.3 The Association of Insurance Brokers of Moldova
The Association of Insurance Brokers (ABAR) was officially registered just last month, on
April 9th, 2009. ABAR’s President, Mrs. Veaceslav Gamurari, is also the director of
Vestecom-Plus Insurance Brokers, one of the five founding members of the association. In
a general assembly meeting on February 3rd, 2009, the association approved its first
charter. Its mission is to promote and protect the interests of insurance brokers while
collaborating with other market participants, particularly insurance firms, to raise
professional standards and contribute to market development.77 A synopsis of its primary
activities is presented in Figure 4 in Appendix 2.78
Mr. Gamurari believes that the market for insurance brokers will evolve as the overall
insurance market in Moldova does. However, he asserts that brokers need to take a more
proactive stance in shaping their own futures – to educate their customers and to reach
out to progressively-minded insurance firms. 79 This is what he plans to accomplish while
at the helm of the ABAR. According to an article with Capital Market Magazine, Mr.
Gamurari will be satisfied when 30 percent of total underwritten premiums are
intermediated by brokers; “that’s what I would call a good result.”80 More on insurance
brokers can be found in section 3.7.2.
3.3.4 The National Office of Automobile Insurers
The National Office of Automobile Insurers (“Biroul National al Asiguratorilor de

Autovehicule,” BNAA) is the Green Card National Bureau of Moldova. It is not a trade
association per se. Rather, it serves as an intermediary between all domestic insurance
firms who are licensed to sell Green Card insurance and the Council of Bureaux, located
in Brussels, Belgium, which manages the International Green Card System.
According to the Council of Bureaux website, each Green Card Bureau has two primary
functions: to handle and settle accident claims taking place on Moldovan territory by a
foreign driver, and to act as the guarantor of insurance carried by Moldovan citizens
when traveling abroad.81 It operates with an office-to-office system, whereby all
77 The Moldovan Insurance Portal, www.Asigurare.md. Retrieved April 3, 2009.

78 Charter of the Association of Insurance Brokers. Approved at General Assembly Meeting, February 3, 2009,
Chisinau, Moldova. Gathered in March 2009.
79 Gamurari, Veaceslav. The market for insurance brokers: Quo Vadis? ARS Assecuratiorum, December
2008.
80 Tudoreanu, Ghenadie. Interview with Veaceslav Gamurari. Capital Market Magazine.
www.capitalmarket.md. Retrieved April 3, 2009.
81 The Council of Bureaux website. www.cobx.org. Retrieved April 2, 2009.
transactions are handled between the respective National Bureaux involved in a claim.
For example, when a Moldovan citizen has an accident in Germany, the German Bureau
pays the claim and is subsequently reimbursed by the Moldovan citizen’s insurance firm
via the Moldovan Bureau.
Four insurance firms in Moldova are licensed to sell the Green Card: Moldasig, ASITO,
Grawe Carat and Astrovaz. In order to participate, these firms need to receive licensing
from the CNPF and to each contribute €500,000 to the BNAA to meet the €2 million
minimum requirement of the Council of Bureaux. Other insurance firms in Moldova are
permitted to sell Green Card policies, but only as intermediaries.
3.4 Industry-specific publications
The dynamic development of the insurance market in Moldova has also incited the recent
launch of industry-specific publications. The first is a specialized magazine, ARS
Assecuratiorum, and the second is Moldova’s first online Insurance Portal,
www.Asigurare.md. Both are supporting an environment of information dissemination
and dialogue between market stakeholders. Again, microinsurance is not currently
mentioned in either medium, which will be further described below.
3.4.1 ARS Assecuratiorum: the Art of Insurance Magazine
December 11th, 2008 marked the launch of aptly-named ARS Assecuratiorum (“the Art of
Insurance”), the first specialized insurance publication in Moldova. Its editor-in-chief, Dr.
Teodor Ungureanu stated that the magazine’s intention is to be a “platform of
communication between the market participants.”82 In the December 2008 introductory
issue, Dr. Ungureanu writes that he hopes the publication will positively contribute to the
development of a “civilized insurance market” while providing an environment for
analysis and discussion.83
The structure of each issue, published bi-monthly, includes sections covering national and
international insurance news, financial analysis, pertinent politics and legislation, and a
plethora of topics including reinsurance, risk management, investments, actuarial
subjects, auditing and brokers. Its website is www.ars.md.
82 Fotescu, Stanislav. The consolidation of informational support for insurance: an imperative of the times.
ARS Assecuratiorum, February 2009.
83 Ungureanu, Teodor. It is time for a specialized publication. ARS Assecuratiorum, December 2008.
3.4.2 Asigurare.md: the Online Insurance Portal
Asigurare.md is Moldova’s first online insurance portal, whose mission is to facilitate the
development of an insurance culture in Moldova as well as to promote the image of
insurance products, firms and brokers.84 In an interview with Natalia Dubencu, the
portal’s administrator, she explains how she wants the website to serve as a “one-stop-
shop” for all things insurance-related. To achieve these objectives, the authors collaborate
with a plethora of industry specialists. Still, Mrs. Dubencu reports that it is not always
easy to convince some insurance firms to furnish information: “Some do not realize that
by making the portal as comprehensive and accurate as possible, everyone benefits.
Unfortunately, the spirit of healthy competition has not yet been inculcated into the
mentality.”85
Online, visitors can learn about almost any aspect of the Moldovan insurance market,
including relevant legislation; detailed analysis, ratings and performance of firms;
highlights of prominent industry figures; job opportunities, and even a divertissement
section with fun facts and jokes about insurance. Moreover, the portal contains
interactive elements, including online polling and a discussion forum where visitors
debate industry issues.
3.5 Overview of insurance firms
In early 2008, there were 33 registered companies. As of March 2009, there were only 27
firms, after the merger of Grawe and Carat, as well as the license revocation of five firms
who did not meet the minimum capitalization requirement. The country’s two largest
firms, Moldasig and ASITO, underwrite over 50 percent of total premiums. Eighty
percent of the market is controlled by the five largest firms (figure 7 below); while the top
ten firms collectively control 87 percent. Larger firms have well-diversified portfolios
and offer a wide assortment of products. Key performance indicators for Moldova’s ten
largest firms are summarized in figure 8 and table 8 below.
Conversely, the 17 smaller firms share the remaining 13 percent of the market. In essence,
these firms fiercely compete over a small number of potential customers, with many
surviving only through the sale of the obligatory motor third party liability (referred to as
RCA in Moldova), or other mandatory insurances. When the annual capitalization
increase occurs on April 6th of next year, it is expected that several of the smaller and less
84 The Moldovan Online Insurance Portal. www.Asigurare.md. Retrieved April 5, 2009.

85 Interview with Natalia Dubencu, Web Administrator for www.Asigurare.md and Insurance Consultant for
VesteCom Plus Brokers. Interview date: March 19, 2009 in Chisinau, Moldova.
diversified firms will disappear. Moreover, many of the smaller firms are quasi-captives,
linked to larger corporations to whom they funnel back money.
Microinsurance is currently not offered by any insurance firm in Moldova. None of the
representatives from the eight insurance firms interviewed were familiar with the
concept. Despite lack of knowledge, they found it appealing and admitted that their firms
are not proactively reaching out to lower-income persons. In fact, no Moldova insurance
firms are making a marked effort to target the lower-income population, instead focusing
on corporate clients. In addition, many firms not only depend on compulsory insurances
for their existence, but also self-admittedly do not even use these to their best advantage.86
Nevertheless, the industry is dynamic, as the 2006 legislation pushes for further
professionalization and consolidation in the market. There is a great deal of activity
currently in the industry, but it is in the early stages. To provide a better understanding
of the insurance industry in Moldova, the history, performance and activities of Moldova’
top five firms will be briefly discussed below. In addition, Garantie Insurance Company,
who is currently the on-site partner of Zurich, will be included.
Figure 7: Market share of five top insurance firms, in 2008
All others
22% Moldasig
30%
Donaris
6%
MOLDCARGO
7%
Grawe Carat ASITO
Measured by gross
12% 23%
written premiums
Source: ARS Assecuratiorum Magazine, February 2009.
86 Cernica, Veaceslav. The palette of obligatory insurances. ARS Assecuratiorum Magazine, February 2009.
Figure 8: 2008 total premiums, top ten insurance firms
300
250.3 MDL millions
250
189.6
200
150
101.8
100 59.5 49.6 37.2
50 15.4 13.5 12.6 12.5
0
Table 8: 2008 Key figures for Moldova’s top insurance firms
Company Total Total Claims Total Profit*

premiums* claims* ratio assets*
Moldasig 250.3 75.2 30.0% 327.9 61.0
ASITO 189.6 66.2 34.9% 349.7 22.5
Grawe Carat 101.8 15.7 15.4% 142.7 11.6
MOLDCARGO 59.5 23.9 40.2% 64.5 12.0
Donaris Group 49.6 22.6 45.5% 31.6 1.1
Moldova-Astrovaz 37.2 16.5 44.3% 49.1 1.4
Victoria Insurance 15.4 5.4 35.1% 36.6 4.2
AFES-Moldova 13.5 13.9 102.9% 32.1 10.2
ARTAS 12.6 4.3 34.1% 16.9 2.8
Garantie 12.5 3.8 30.4% 24.5 8.2

* Figures are in millions MDL and have been rounded to the nearest .1 million MDL
3.5.1 Moldasig
Moldasig (“Societatea Internationala de Asigurari Moldasig”) was founded in 2002 and

within seven years, achieved the number one position in the market. It was state-owned
until July 2008, when a major Russian firm, Rosgosstrah, entered the Moldovan insurance
market by purchasing an 80 percent share in the company. According to their website,
Moldasig’s mission is to protect the well-being of Moldova’s citizens by offering the most
accessible insurance products.87 It currently holds a license for general (non-life),
insurance and offers over thirty insurance products. It has ten offices, one in Chisinau
and nine regional branches, with a total staff of over 1,100 employees and agents.
Moldasig had almost 30 percent market share for both 2007 and 2008. In 2008, Moldasig
collected over 250 million MDL in total premiums, of which it paid over 75 million MDL
in claims (23 percent). For numerous products, it holds the first or second market
position. Over 60 percent of Moldasig’s portfolio is automobile-related insurance. After
Grawe Carat, it holds second place for personal insurance, with 28 percent market share.
In addition, Moldasig is the only other firm besides MOLDCARGO licensed to sell the
state-subsidized agricultural insurance.
A slight feeling of distrust, and perhaps discomfort, was encountered when the name
Moldasig was mentioned in several interviews. The general sentiment is that Moldasig
monopolizes the insurance market with the tacit support of the Moldovan government.
For example, almost all public sector institutions are insured through Moldasig; in
addition, public sector employees are encouraged, if not forced, to purchase personal
insurance products through the firm. Indeed, the President of Moldova, Vladimir
Voronin and his son, Oleg, are shareholders in various influential firms in Moldova,
including the nation’s number one insurance company.88 This interference is not
unknown to the general population; in fact, it is a topic often discussed with distaste and
cynicism on various Moldovan blogs and online discussion forums.89
3.5.2 ASITO
ASITO (“Compania Internationala de Asigurari ASITO”) was officially formed on the 6th
of June, 1991, coinciding with the dismantlement of the state monopoly on insurance and
the formation of a new regulatory environment. In September 1999, the QBE Insurance
Group of Australia was the first international insurance firm to enter the Moldovan
market when it acquired a majority shareholding in the firm. In March 2007, the QBE
Group sold all of its shares. Today, ASITO holds a general insurance (non-life) license.
Of all insurance companies in Moldova, it has the largest branch network; with 37 offices,
there is at least one ASITO representation in every county in Moldova. Many of these
offices were inherited from the Soviet Gosstrakh monopoly.90
87 The International Insurance Company Moldasig website. www.moldasig.md. Retrieved February

88 Interview with Roxana Savescu, Assistant Professor Lucian Blaga University, Sibiu, Romania, and free-
lance microfinance consultant. Date: March 23rd, 2009 via telephone.
89 The Site of Bassarabians in Romania. www.Basarabeni.ro and Yahoo Groups website
http://groups.yahoo.com/group/romania_eu_list/message/51835 Retrieved February 22, 2009.
90 AXCO Insurance Market Report for the Republic of Moldova, 2008.
ASITO currently occupies the second position in the Moldovan market. In 2008, it
underwrote over 189 million MDL in premiums, representing a total market share of
almost 23 percent. It earned over 22 million MDL in net profit. The company proudly
declares on its website that it is Moldova’s largest payer of claims.91 For numerous
products, it is often competing with Moldasig for the first or second place market
position. Vehicle-related products constitute over 75 percent of its portfolio.
With 18 years of experience in the Moldovan insurance market, ASITO is the industry’s
oldest veteran. In fact, throughout many rural areas, it has reached eponym status, as
insurance director, Nina Rabeja, stated: “Many people in rural areas equate ‘ASITO’ with
insurance. They come into the office and say ‘I want to purchase an ASITO please.’”92
Stela Culicov of ARTAS Insurance Company echoed this statement and explained that
this stems from the fact that ASITO was created from the remnants of the state-run
insurance company of the Soviet era.93
3.5.3 Grawe Carat
Grawe Carat (“Grawe Carat Asigurari SA”) is the result of the acquisition of the
Moldovan firm Carat by Austrian Group Grazer Wechselseitige (Grawe), a broadly
diversified international firm with banking, insurance and real estate companies.94 In the
last two decades, Grawe has expanded rapidly into Eastern Europe, where it is now
present in eleven countries. Grawe entered the Moldovan market in 2003 as Grawe Life
Insurance Company, quickly becoming the market leader and setting the standards for
life insurance in Moldova. In 2006, it acquired Donaris Life Insurance, and continued to
grow rapidly.
In 2008, Grawe decided to diversify into the non-life insurance market by acquiring Carat
Insurance. Carat was one of the first private insurance companies in Moldova, and was
concentrated on automobile-related insurance, which represented almost 92 percent of its
portfolio in 2008. Meanwhile, Grawe had over 89 percent of the market share of life
insurance. In 2008, they underwrote a total of over 100 million MDL in premiums.
91 ASITO International Insurance Company. www.asito.md. Retrieved February 23, 2009.

92 Interview with Nina Rabeja, Director, Vitorasig Criuleni branch. Date: March 18, 2009 in Criuleni,
Moldova.
93 Interview with Stela Culicov, Insurance Specialist, ARTAS Insurance Company. Date: March 23, 2009 in
Chisinau, Moldova.
94 Founded in 1828 by Archduke Johann with the intention to provide “reliable insurance cover for all,”
Grawe is currently the fifth largest insurance company in Austria, with over 1.7 million contracts under
management, representing premium income of over €435 million. Grawe website. Retrieved April 2009.
The merger between Grawe and Carat, official as of February 5th, 2009, created the third
largest insurance company in Moldova. Collectively they have the broadest array of
insurance products on the market – offering everything except health insurance.
According to Marketing Manager, Angela Solonari, the firm is now undergoing a period
of rebranding to better position itself in the market. “We want to educate our customers
about Grawe’s long and respectable heritage. We also believe that financial education of
the general population is necessary and we hope to contribute to that education.”95
3.5.4 MOLDCARGO
MOLDCARGO (“Societatea de Asigurari MOLDCARGO SRL”) was established in

October 1999 by the International Association of Auto Transport Providers (“Asociatia
Internationala a Transportatorilor Auto,” AITA), whose mission is to represent and
protect the interests of its auto-transport-related enterprises and organizations.96 It
currently holds a general (non-life) insurance license and offers about 20 types of
insurance. Although MOLDCARGO has grown significantly in its decade of existence, it
still concentrates on automobile, transportation and goods insurance, which represents
over 72 percent of its portfolio.97
Last year, MOLDCARGO surpassed Donaris to become the fourth largest insurance
company in Moldova, with 6.7 percent market share. In 2008, it underwrote over 59
million MDL in premium, a 30 percent increase compared to 2007. It is also the only other
insurance firm, besides Moldasig, to offer the state-subsidized agricultural insurance.
3.5.5 Donaris Group
Founded in 1998, Donaris recently celebrated its ten-year anniversary in the Moldovan
insurance market. Donaris’ director, Dr. Teodor Ungureanu, is also the chief editor of the
recently launched ARS Assecuratiorum Magazine. It is currently the fifth largest
insurance firm in Moldova, with 49 million MDL in total premiums in 2008 and 5.6
percent market share.
Donaris presently holds a general (non-life) insurance license, and although it has a wide
offering, almost 75 percent of its portfolio stems from automobile-related insurance..98
According to an interview with Insurance Specialist, Serghei Boico, over 60 percent of
95 Interview with Angela Solonari, Marketing Manager, Grawe Carat Insurance. Date: March 19, 2009 in
Chisinau, Moldova.
96 The International Association of Auto Transport Providers. www.aita.md. Retrieved April 2009.
97 MOLDCARGO Insurance Company website. www.moldcargo.md. Retrieved April 2009.
98 ARS Assecuratiorum Insurance Magazine. Results of the first nine months of 2008. February 2009
business comes from corporate clients.99 Donaris has an extensive network of offices in
Chisinau, as well as eight regional branches. In fact, Donaris actually has over 200 point-
of-sale locations throughout Moldova, because it utilizes a variety of nontraditional
distribution channels, such as supermarkets and petrol stations, for their automobile-
related business.100 It employs over 1,000 employees and agents nationwide. 101
3.5.6 Garantie
Wherever Zurich Financial does not have its own locally licensed entity, it selects an on-
site partner to issue policies locally and to service its international corporate clients
present in that country. Garantie (“Garantie Asigurari”) has been the correspondent
insurer of Zurich Financial Services (ZFS) in Moldova since December 31st, 2004, a
relationship managed through the ZFS hub in Stockholm, Sweden. For 2009, Garantie is
servicing several multinational companies in Moldova on behalf of Zurich. According to
Garantie, their strong customer service orientation, flexibility, and their easy-to-navigate
policies make them a preferred on-site partner.102 In an interview with management, they
expressed a keen interest in further developing their relationship with ZFS and in helping
introduce a potential microinsurance product on the Moldovan market. 103
Founded in 1993, Garantie was one of the first private insurers in Moldova. Presently,
Garantie focuses on general insurance (non-life), and offers a large array of products to
both individual and corporate clients. They are headquartered in Chisinau and have six
regional offices.
Garantie, which literally translates to “guarantee,” is among the top ten largest insurance
firms in Moldova. In 2008, Garantie underwrote over 12 million MDL in premiums,
representing 1.6 percent of the total market. According to the firm’s director, Alexei
Toporov, premiums grew by 15 percent from 2007 to 2008.104 Automobile-related
insurance represents over 30 percent of Garantie’s total business.105
99 Interview with Serghei Boico, Insurance Specialist, Donaris Insurance Company. Date: March 16, 2009 in
Chisinau, Moldova.
100 The Moldovan Insurance Portal, Donaris company overview. www.Asigurare.md. Retrieved March 2009.
101 Alcaza, Lilia. Interview with Teodor Ungureanu. Capital Market Magazine. www.capitalmarket.md.
Retrieved March 30, 2009.
102 Interview with Annaslav Yakovenko, Director of Corporate Reinsurance, and Alexandru Balteanu,
Reinsurance and Corporate Clients Department. Date: March 26, 2009 in Chisinau, Moldova.
103 Interview with Vitalii Robu, Sales Director, and Mihail Josan, Insurance Director. Date: March 26, 2009 in
Chisinau, Moldova
104 Petrenko, Dmitrii. Garantie: Fifteen years on the Moldovan insurance market – an interview with
Director Alexei Toporov. Capital Market Magazine. www.capitalmarket.md. Retrieved March 29, 2009.
105 ARS Assecuratiorum Insurance Magazine, Results of the first nine months of 2008. February 2009
3.6 Insurance products
There is currently no microinsurance product offered on the Moldovan insurance market.

Although no products specifically tailored for the lower-income population exist, there
are some simple insurance products that are both affordable and accessible to this
segment, such as RCA or credit life.
Insurances are separated into four categories by the CNPF: compulsory insurances, such
as motor third party liability and Green Card; voluntary insurances of goods, including
commercial enterprises, agriculture, automobile, financial risks, homes and personal
items; voluntary personal and accident insurance, including pensions, annuities, life and
health; voluntary professional liability insurances, such as aerial and auto transportation
providers, and professional indemnities.
Automobile-related insurances account for over 60 percent of total insurance premiums.

Compulsory insurances comprise 40 percent of total premiums. Figure 8 and table 9
below outlines key figures for select products, and some are further discussed below.
Figure 9: Percentage of total insurance premiums by category
Professional
6%
P&A
14%
Compulsory
40%
Property
40%

Table 9: Overview of select insurance products in Moldova, 2008
Product *Total *Total Claims Insurance

premiums claims ratio density
RCA 172.2 71.2 41% 39.80 MDL
($3.50)
AUTOCASCO 192.5 117.4 60% 44.50 MDL
($4.00)
Green card 159.1 31.8 20% 36.80 MDL
($3.30)
Property 59.5 23.9 40% 13.70 MDL

(home and personal goods) ($1.20)
Agriculture 45.0 13.1 29% 10.40 MDL
($.90)
Life 93.4 7.0 7.5% 21.6 MDL
($1.90)
Accident and illness 21.2 6.9 33% 4.90 MDL
($.40)
Supplementary health 29.3 8.1 28% 6.80 MDL
($.60)
Financial risk 7.5 3.6 48% 1.70 MDL
($.15)
TOTAL MARKET 833.2 269.3 32% 192.70 MDL
($17.10)
* Figures are in millions MDL and have been rounded to the nearest .1 million MDL
3.6.1 Supplementary health insurance
Supplementary health insurance is only available through a few insurance firms in

Moldova. Moldasig and ASITO are currently the leading providers. In 2008, over 29
million MDL ($2.5 million) in total premiums were underwritten. The overall penetration
is extremely low in Moldova, likely due to the existence of the CNAM and the high costs
relative to average incomes. Most covered by supplementary health insurance are
employees of large international firms. Moldasig, for example, only sells policies to
corporate entities; ASITO sells to both individuals and firms but admits most contracts
stem from corporate clients.
Supplementary insurance offers subscribers higher quality care, better facilities, shorter
waiting times and no geographic limitations. The terms and conditions are generally
more flexible than those of the CNAM. For instance, instead of being assigned to a
doctor, patients can choose their own, who then coordinates the care and subsequent
treatment. In hospitals, coverage usually includes salons with one, two or four persons –
a luxury in Moldova, where the average patient is placed in large institutional salons with
eight or ten others. Mr. Ion Cebotari, the Department Manager of Supplementary Health
Insurance at Moldasig, claims that doctors and nurses pay more attention to patients with
supplementary coverage.106
However, not all specializations and procedures are covered. For instance, maternity,
pediatrics, oncology, infectious diseases, psychiatry, and some surgeries, can only be
covered through CNAM programs. Regardless of whether a person purchases
supplementary coverage, the law mandates that the CNAM policy still be purchased.
Costs depend on the applicant’s age, pre-existing medical conditions and occupation. At
Moldasig, costs for individuals range from 2,500 to 6,000 MDL ($220-530) per year, for
coverage up to 20,000 MDL ($1,775). At ASITO, the average yearly cost is 10,000 MDL
($890), for coverage of 25,000 MDL ($2,220). Costs are generally lower for firms. Payment
is made in full at the time of contract. Subsequently, patients do not pay for treatment,
until the maximum annual coverage is reached. At that time, the patient becomes
responsible for all charges. When insinuating to Mrs. Victoria Pascaru, Underwriter in the
Health Insurance department at ASITO, that it must be quite difficult to reach the
maximum, she retorts, “It is not that hard at all to exceed this limit.”107
3.6.2 Property insurance
During the Soviet era, household insurance was compulsory. Now, however, penetration
and density of property insurance in Moldova is extremely low, in part because of the
limited resources of the population and in part because of the lack of a well-developed
insurance culture. Commercial and industrial property insurance was not compulsory
under the Soviet system, and this tradition continues today, demonstrated by the fact that
international firms comprise the majority of property insurance clients.
The cost of insurance depends on the category of the goods, the type of risks insured, the
deductible assumed by the insured, contract terms, as well as other factors. Personal and
commercial property, household goods and animals can all be insured from a plethora of
risks, including fire, natural disasters, accidents, theft and more. Insurance can be
purchased for less than the total value of a good, with the premiums and claims reflecting
the adjusted amount. In general, the annual cost of the insurance is 0.2 to 3 percent of the
insured sum.108
106 Interview with Ion Cebotari, Manager of the Supplementary Medical Insurance Department, Moldasig.
Interview date: March 19, 2009 in Chisinau, Moldova.
107 Interview with Victoria Pascaru, Underwriter, Health Insurance Department, ASITO Insurance Company.
Interview date: April 10, 2009 via telephone.
108 ARTAS Insurance Company website. www.artas.md. Retrieved April 2009. ARS Assecuratiorum
Total 2008 premiums for household and personal goods were 4.1 million MDL ($360,000),
and 1.9 million MDL ($170,000) for apartments. Insurance of commercial goods was 32.7
million MDL ($21.9 million). Collectively, this represents only 4.6 percent of total market
premiums. The leading insurers were ASITO (particularly for personal property),
Moldasig, Exim-Asint, Donaris and Victoria Insurance.
3.6.3 Automobile insurance
Automobile-related insurance comprises over 60 percent of total underwritten premiums

in Moldova, and also represents the majority of most insurance firms’ portfolios. The
three primary categories of automobile insurance are discussed in further detail below.
3.6.3.1 RCA: Compulsory motor third party liability insurance
On June 27th, 1994, Moldova passed its first law which introduced obligatory motor third
party liability (MTPL). In 2004, legislation was passed that required all drivers to
purchase AORCA, “Asigurarea Oligatorie de Raspundere Civila Auto” (Obligatory
Insurance of Automobile Civil Responsibility, commonly referred to as RCA). On the 22nd
of December, 2006, law nr. 414-XVI was passed that increased liability to 500,000 MDL
($44,300) for material damage and to 350,000 MDL ($31,000) for bodily damages or death,
up to a maximum of 700,000 MDL ($62,100) regardless of the number of persons. The
legislation also covers other conditions such as contract terms, premiums, claims and
proof of payment.
Tariffs for RCA insurance are established through legislation; a recent tariff update was
enacted as of October 31st, 2008. Costs depend on the vehicle category and motor
capacity, with adjustments made for the driver’s age, residence and contract term. Costs
are generally higher for commercial entities. For individuals, annual coverage
(unadjusted) ranges from approximately 250 to 2000 MDL ($20-175).
The leading insurers of automobile insurance are Moldasig, MOLDCARGO and ASITO.
Total premiums were 172 million MDL ($15.2 million) in 2008, which represents over 20
percent of total premiums. Depending on the firm, RCA is sold through a variety of
distribution channels, including insurance firm branches, agents, brokers, supermarkets,
petrol stations, post office and automobile repair garages. ASITO even has agents at
police stations who can sell new policies to drivers registering their vehicles.109
Magazine, February 2009 issue.

109 AXCO Insurance Market Report for the Republic of Moldova, 2008.
3.6.3.2 Autocasco: Supplementary comprehensive automobile insurance
“Autocasco” is a supplementary automobile insurance available for vehicles up to 15

years old. Two types of packages are available: the first, “Casco Total,” is a
comprehensive product covering both theft and damages from risks such as accidents,
fire, natural disasters, and more. Conversely, “Casco Partial” only provides coverage for
damages. The premium depends upon several factors, including driver’s age, term,
vehicle age and type, as well as the deductible amount. Separate coverage can also be
purchased for additional components such as telephone, audio or GPS (global positioning
system).
The firms who generate the most premiums for Autocasco are Moldasig, ASITO,
MOLDCARGO and Donaris. Total insurance premiums for 2008 – for both individuals
and commercial entities – was over 192 million MDL ($17.1 million), representing over 23
percent of total market premiums.
3.6.3.3 “Carte verde” – the International Green Card System
The Green Card program, administered by the Council of Bureaux in Brussels, Belgium, is
an international system of 44 countries whereby motorists can freely travel among
member countries without having to purchase automobile insurance for each country
visited. Therefore, the Green Card (“Carte verde” in Moldova) serves as proof of motor
third party liability insurance should an accident occur while traveling abroad.
Moldova became a member of the International Council of Bureaux on August 1st, 1999.
Currently, four insurance firms are licensed to sell the Green Card: Moldasig, ASITO,
Grawe Carat and Moldova-Astrovaz – while the other insurance firms can sell these
products as intermediaries. In Moldova, two types of “Carte Verde” are available for
purchase: one for travel within the Ukraine and Belarus, and one valid throughout the
International Green Card System. Coverage terms range from a minimum term of 15
days to a maximum of one year, and costs depend on the automobile category and term.
For example, for 15 days in the international system, costs are about €50 for a typical
passenger automobile; for one year, the cost is about €800.110
After Autocasco and RCA, Green Card insurance is the third most popular insurance
product measured by total annual premiums. Premiums underwritten in 2008 were 159
million MDL ($14.1 million), which represents almost 20 percent of total premiums.
110 ARTAS Insurance Company website. www.artas.md. Retrieved April 2009. .

3.6.4 Life insurance
In 1987, during the Soviet system, over one million life insurance contracts were active in
Moldova. A decade later, this number was close to approaching zero.111 However, in the
early 2000s, the entrance of several international insurance firms specialized in life
insurance, such as the Austrian firm Grawe, infused life into this dying sector. In the last
six years, the growth has been swift: in 2003, total premiums collected were 5.7 million
MDL, while in 2008, this number was 15 times more, over 90 million MDL ($7.9 million).
Since 2003, the annual growth rate of life insurance premiums has been 40 to 60 percent
every year.
Despite the seemingly impressive figures, relative to other countries, Moldova’s numbers
are still quite low. Moldova’s neighbor, Romania, is often used as an example: although
Romania’s population is only 6-7 times larger than that of Moldova, its total annual
insurance premiums are 160 times larger.112
Although growing rapidly, the life insurance market in Moldova is still in an embryonic
stage, and therefore, the product range remains traditional. Mixed life insurance, which
combines life insurance with an endowment policy, is the most common product. The
beneficiary also has the option to purchase supplementary protection; for example, to
cover disability or accidental death. According to the Moldovan Insurance Portal, any
healthy individual between the ages of 0 to 65 can purchase a life insurance policy. Terms
are 10, 15, 20 or 25 years, and the minimum annual premium is 3000 MDL ($265), which is
paid either quarterly or annually. Anyone who wishes coverage only up to 300,000 MDL
($26,600) can obtain the insurance without a medical examination. The insurance
premium is calculated depending on the insured’s age, gender, desired coverage, contract
term and the annual premium.113
The market leader for life insurance in Moldova is by far Grawe Carat, which controls
about 90 percent market share for life insurance, representing approximately 80 million
MDL in annual premiums. Grawe works both with agents and brokers for distribution.
Veaceslav Gamurari, President of the ABAR, asserts that most brokerages deal very little
with life insurance because the acquisition costs are too high to make it profitable.”114
Beyond life insurance, personal accident and illness insurance is highly underdeveloped,
with total annual premiums of 22 million MDL ($1.9 million). Supplementary pension
111 Cernica, Veaceslav. Life insurance in the Republic of Moldova: its growth to the top of the populations’
preferences. ARS Assecuratiorum Insurance Magazine, December 2008.
112 Cernica, Veaceslav. Life insurance in the Republic of Moldova: its growth to the top of the populations’
preferences. ARS Assecuratiorum Insurance Magazine, December 2008.
113 The Moldovan Insurance Portal. www.asigurare.md. Retrieved April 10, 2009.
114 Interview with Veaceslav Gamurari, Director of Vestecom Plus Insurance Brokerage, and President of the
Association of Insurance Brokers of Moldova. Interview date: March 17, 2009 in Chisinau, Moldova.
products, such as rents and annuities, had total premiums of only 200,000 MDL ($17,700)
in 2008.
3.6.5 Credit Life Insurance
Credit life insurance is also highly undeveloped in Moldova. Just two years ago, banks
began to sell credit life insurance when disbursing loans, although this is still in early
stages, according to Nadya Litvac of the EBRD.115 Currently, no commercial banks or
MFIs require credit life insurance when taking out a loan. Costs are generally quite
reasonable. For example, Vitoriasig provides protection in case of borrower’s death at an
annual cost is 1.5 percent of the loan principle.
Within the CNPF data, there is no category entitled “credit life.” However, under
voluntary goods insurance there is a product category named “financial risk” insurance,
for which 7.5 million MDL ($660,000) in premiums were underwritten in 2008.
3.7 Distribution channels and marketing
The majority of insurance companies in Moldova principally utilize traditional

distribution channels, such as agents and brokers, as well as traditional marketing
instruments, such as print advertising and customer promotions.
Many firms do not make a discernible effort to establish long-term relationships with
individual customers. There is also no specific marketing towards low-income persons or
rural populations. Reputable brokers are known, however, to provide good customer
service, and to invest resources in customer relationship management, but again, more
with corporate clients or higher-income individuals.
3.7.1 Distribution channels: General overview
At the outset, it is important to distinguish between sales and distribution channels used
for individuals and those used for commercial entities. For individuals, direct sales
channels and multi-level marketing, are widely used.116 Many firms rely on a direct sales
force through their regional branches where agents are typically compensated with a
115 Interview with Nadja Litvac, Principle Banker, European Bank for Reconstruction and Development.
Date: April 8, 2008 via telephone.
116 Multi-level marketing, otherwise known as network marketing, and sometimes associated with pyramid
chemes, is a strategy that compensates distributors/salespersons for their sales, as well as for the sales of
others introduced to the firm. Federal Trade Commission website, www.ftc.org. Retrieved April 2009.
combination of salary and commission. For example, Donaris currently employs over 300
agents nationwide. Commission can range from 10-25 percent.
Furthermore, many firms also have agreements with a variety of insurance brokerages.
For instance, Vestecom-Plus Insurance Brokers currently works with six firms. Grawe
Carat currently has a network of exclusive agents, and also partners with seven
brokerages.117 It is important to note that according to the 2006 insurance legislation,
insurance firms are legally liable for the mistakes and oversights of their intermediaries.
More on insurance brokers can be found in section 3.7.2 below.
There is little to no selling through telephone, direct mail and internet. In addition,
bancassurance is not well-developed, although a few banks recently began selling credit
life in the last two years.118 Currently, insurance is not sold through non-bank
microfinance institutions or through savings and credit associations.
For corporate clients or commercial entities, the relationship is usually managed at the
director level. Contracts are often signed on the basis of personal or political
relationships.119 In addition, since several firms have been established as captives, most of
their business comes directly from their mother firm. Direct sales and multilevel
marketing can also be used for commercial clients as well.
From interviews with eight insurance companies, the one product distributed via
nontraditional distribution channels is the obligatory motor third party liability insurance
(RCA). Some firms sell RCA policies through grocery stores, commercial centers and
petrol stations. Other firms also sell via the post office and automobile repair garages. 120
Donaris recently began accepting premium payments through the Post Office of Moldova
(POM). These alternative distribution channels could certainly be used to sell other
straightforward insurance products, including microinsurance.
3.7.2 Distribution channel: Insurance brokers
Because insurance brokers were not regulated before 2002, there were countless “corner”
brokerage firms whose sometime unscrupulous behavior harmed the reputation of
brokers. By 2006, there were as many as 80 small insurance brokerages in Moldova.
However, the 2006 insurance law, which increased the minimum capitalization and
qualifications, helped raise professional standards. Today, brokerages are used by the
117 Grawe Carat Insurance Company website. www.grawe.md. Retrieved April 15, 2009.
118 Bancassurance is when a bank sells insurance products.
119 AXCO Insurance Market Report for the Republic of Moldova, 2008..
120 Interview with Serghei Boico, Customer Service Representative, Donaris Insurance Company. Interview
date: March 16, 2009 in Chisinau, Moldova.
majority of large insurance companies in Moldova. For example, ASITO declared that
almost 20 percent of its insurance contracts were secured through brokers.121 As of March
2009, the CNPF lists 35 insurance brokerages.122
Nevertheless, the overall brokerage market in Moldova is still in early development.

According to an article in ARS Assecuratiorum, most brokerages are small firms, with
only four or five employees and non-diversified portfolios due to an over concentration
on automobile-related insurance.123 Indeed, in an interview with broker Natalia Dubencu,
she affirms that the majority of her business stems from obligatory automobile insurance
like RCA, and maintains that the same applies to her colleagues at other brokerages.124 In
short, many insurance brokers, like many insurance firms, survive on the mandatory
insurance legislated by the government.
Mr. Gamurari, Vestecom-Plus Director and President of ABAR, maintains that there are
several deficits affecting the current state of brokerages in Moldova. Firstly, there is lack
of transparency and cooperation between insurance brokers.125 In a separate interview, he
attests that there is a lack of understanding in the market – even among insurance firms –
about the important role played by brokers. He explains how many perceive brokers as
“just salesmen.” Furthermore, he claims that some insurance firms feel threatened by
brokers, because brokers protect the client’s interests. “Independent brokers represent a
filter [between the firm and the client] and do not propose just any insurance firm or
product to their customers – but rather, those that correspond to the customers’ needs.”126
3.7.3 Marketing overview
For marketing and advertising, most insurance firms rely on traditional mass media
channels such as television and radio; print advertising in newspapers, magazines and
billboards; marketing collateral such as brochures and pamphlets. Smaller firms have
limited marketing because of high costs. Several insurance representatives stated that
they have ceased or limited their use of television advertising because it is prohibitively
expensive, with limited ROI. Instead, they focus on radio and print advertising.127 In
121 AXCO Insurance Market Report. 2008. Southeast Europe insurance market report: Non-life (P&C).
122 National Commission on Financial Markets. www.cnpf.md. Retrieved April 2009.
123 Gamurari, Veaceslav. The market for insurance brokers: Quo vadis? ARS Assecuratiorum, December
2008.
124 Interview with Natalia Dubencu, Insurance Consultant for Vestecom Plus Insurance Brokerage, and
Administrator of Moldovan Insurance Portal, www.asigurare.md. Interview date: March 17, 2009 in
Chisinau, Moldova.
125 Interview with Veaceslav Gamurari, Director, Vestecom-Plus Insurance Brokers. Date: March 17, 2009 in
Chisinau, Moldova.
126 Tudoreanu, Ghenadie. Interview with Veaceslav Gamurari. Capital Market Magazine.
www.capitalmarket.md. Retrieved March 22, 2009.
127 Interview with Serghei Boico of Donaris (March 16, 2009) and Stela Culicov of ARTAS (March 23, 2009),
addition, some collaborate with relevant publications to conduct interviews and write
articles related to insurance.
Moreover, some of the more dynamic firms engage in event sponsorship and customer-
facing promotions. For example, in the summer of 2008, Garantie Insurance Company
sponsored a three-month promotion entitled “Vara linistita” (“Peaceful summer”) which
provided preventative health examinations to students for €3 and invited them to learn
more about the benefits offered by Garantie. Also in 2008, Grawe Carat sponsored a
classical music festival as well as several philanthropic events.128 This spring, Donaris is
holding a special promotion for RCA and Autocasco insurance; all new subscribers have
the chance to win prizes such as a travel medical kit or free gasoline.129
Certain limitations prevent firms from utilizing marketing tactics commonly utilized in
other western countries. For example, telemarketing is nonexistent because the
penetration of telephone landlines is only approximately 30 percent.130 Interestingly, the
penetration of mobile phones is significantly higher at almost 53 percent.131 In addition,
internet marketing is not used in insurance, as less than 20 percent of the population has
internet access.132 However, most of the larger insurance firms do at least have websites.
Finally, there is little to no direct mail marketing, mainly because customers are not
particularly receptive, making the ROI for firms extremely low.
Regardless of how advanced an insurance firm’s marketing department is, one thing they
all seem to agree on is that word-of-mouth is not only the least expensive, but by far the
best form of advertising. As Vitalii Robu, Sales Director of Garantie, stated “Word of
mouth is the only credible source of information.”133 Stela Culicov of ARTAS, confirmed
this opinion: “We can implement costly advertising campaigns, and maybe a handful of
people will subscribe. But when a customer has had a positive experience with us, that is
the best advertising. We receive quite a lot of business through referrals.”134
both in Chisinau, Moldova

128 Interview with Angela Solonari, Marketing Manager, Grawe Carat Insurance Company. Interview date:
march 19, 2009 in Chisinau, Moldova.
129 Donaris Insurance Company website. www.donaris.md. Retrieved April 2009.
130 Moldovan Statistical Bureau. www.statistica.md. Retrieved April 2009.
131 National Agency for the Regulation of Electronic Communication and IT. www.anrceti.md. Retrieved
March 2009.
132 National Agency for the Regulation of Electronic Communication and IT. www.anrceti.md. Retrieved
March 2009.
133 Interview with Vitalii Robu, Sales Director, Garantie Insurance Company. Interview date: March 26, 2009
in Chisinau, Moldova.
134 Interview with Stela Culicov, Insurance Specialist, ARTAS Insurance Company. Interview date: March
23, 2009 in Chisinau, Moldova.
Demand: Profile of potential microinsurance customers 47
4 Demand: Profile of potential microinsurance customers
4.1 Risks and lifecycle events faced by low-income persons
The risks faced by low-income people in Moldova are not dissimilar from those
confronting low-income persons in other developing countries. The primary risks are
categorized and defined in table 10 below.
Table 10: Overview of risks faced by low-income persons in Moldova

Risk type Definition Idiosyncratic or Examples in
Co-variant Moldova
Lifecycle risk Related to events taking Idiosyncratic Births, baptisms,
place during the course of weddings, funerals,
a lifetime, which often deaths, serious illness
entail large expenditures or accident,
university education
Environmental risks Related to the climate, Co-variant Flooding, drought,
physical environment and landslides and
natural disasters earthquakes
Business risks Related to income- Idiosyncratic Loss to business
generating activities (generally) property, automobile,
machinery and
equipment
Source: Compiled from author’s interviews, March-April 2009
Risks can be further classified as idiosyncratic or co-variant. An idiosyncratic risk occurs

by chance to an individual or family at different times. By and large, lifecycle and
business risks are idiosyncratic. Conversely, a co-variant risk simultaneously occurs to a
larger segment of the population. In general, environmental risks, such as floods or
drought, are co-variant.
The primary risks confronting low-income persons and communities in Moldova are
described further below. Although the direct damages and financial burden of these
losses are mentioned, the indirect or secondary effects of such losses, such as human
suffering or psychological stress, must not be overlooked.
4.1.1 Lifecycle risks
Death of the breadwinner: One of the main risks mentioned is the death of a
breadwinner. Firstly, the short-term financial burden is high due to high funeral costs.
The average cost is about 10,000 MDL ($887), with many costing sometimes 20,000 MDL
($1775) or more. In the medium or long-term, this also signifies the loss of income for the
family, placing additional pressure on their ability to cover daily expenses or to save for
future events, such as children’s education or wedding. Additionally, if the breadwinner
has an outstanding, uninsured loan, the family can also inherit the debt burden. If unable
to repay, collateral, if given, can be repossessed, leaving families further at a loss. The
overall severity of this risk is high. However, this is an insurable risk that could be
covered by a life insurance product for the breadwinner, as well as credit life insurance
product for microloans.
Serious illness: Serious illness is also a significant risk. All Moldovan citizens are
covered by the CNAM if they are formally employed. However, many rural persons are
self-employed or work in the informal economy and because of their limited resources,
choose not to purchase the insurance, even during the promotional period. Essentially,
they gamble with their health, and simply hope they will not fall ill throughout the year.
By doing so, they engage in limited prophylaxis, often self-medicating, avoiding the
doctor and foregoing preventative care.135 If a major illness unfortunately occurs, some
persons may choose to subscribe to the CNAM. However, if after March 31st, they must
pay the original, non-promotional price of 2,637.6 MDL ($250) in full, a significant cost for
low-income persons with inconsistent cash flows.
Furthermore, although hospitalization stays are often covered by the CNAM, it is very
common to have to pay “ciubuc” or “mita” – tips or small bribes – to hospital staff and
doctors. This tendency is deeply ingrained in the culture. During the Communism era, in
both Moldova and Romania it was quite appropriate to bring a small gift of coffee or
chocolate as a token of appreciation for the doctor. This practice, however, has mutated
over time, where larger sums of money are sometimes expected or solicited. This is often
explained by the very low salaries that most doctors and nurses receive: a doctor can earn
2000-3000 MDL ($177-$266) per month, while a nurse’s assistant may earn as little as 600
MDL ($53) per month. One interviewee retold a story of an extended hospital stay where
he had to live with a small stack of cash underneath his pillow, paying small amounts
here and there to get better care and attention.
In addition, pharmaceuticals are very expensive in Moldova. The CNAM only covers
very basic medications, and therefore, those diagnosed with serious or chronic illnesses
must bear the financial burden of treatment. Because of these soaring costs, low-income
persons may miss doctor visits or may skip refilling their medications due to lack of
resources. Serious illnesses, however, are insurable risks which can be covered by a
quality, flexible health insurance product, which provides better coverage for
hospitalization, chronic illnesses and pharmaceuticals.
Slobozian. Soros Foundation of Moldova. Date: March 17, 2009 in Chisinau, Moldova.
Household property loss: Like in several post-Communist countries, a land and home
restitution program was implemented in Moldova during the 1990s. Therefore, home
ownership is at a very high level, with over 90 percent of Moldovans owning their
residences. For most, their homes are their most valuable assets, and evidently, any
severe damage or loss can be devastating to a low-income family. Again, this is a risk that
could be properly addressed through a household property microinsurance product.
Educational expenses: One of the primary goals of many rural families is to send their
children to university. Many of these prospective students are the first generation in their
families to leave their local villages and move to the capital – clearly momentous
occasions in the lives of these families. Thus, education is another lifecycle event which
can place financial pressure on a family. An education at a university in Chisinau can cost
5,000 to 15,000 MDL ($443-$1330) per year. Living expenses, including food,
transportation, telephone and books, can add another 500 to 1,500 MDL ($44-130) per
month in expenses. The cost of this lifecycle event is not insurable, and is probably best
addressed by a flexible savings product.
Social and cultural lifecycle events: Beyond potentially idiosyncratic risks, there are
several lifecycle events – baptisms, weddings and funerals – that are expensive, thereby
placing a large financial burden on low-income families. As mentioned above, a funeral
can cost 10,000-20,000 MDL ($887-$1775). Weddings can often be even more expensive,
with some costing 30,000 to 50,000 MDL ($2660-$4400). It is even quite common for
birthdays to become elaborate affairs. One event can be equivalent to the average annual
income of a rural family. Regardless of the large expense and related financial burden,
many people still find ways to pay for these events, through saving over time and
through borrowing. It is important to note that these are long-standing cultural traditions
that hold a high place in the life of Moldovans. There are social consequences for not
fulfilling these obligations, including being shamed and “losing face” in the village.
Additionally, there is an attitude of “one-upmanship,” where families compete to out-do
each other. These costs can also be better handled through flexible savings product rather
than through microinsurance
4.1.2 Environmental risks
Environmental risk – harvest loss: In rural areas, another major risk is the devastation of
the season’s harvest, as farming is often the main source of both subsistence and revenue.
For instance, there was a drought during the 2007 agricultural season which significantly
reduced crop yields for many families. The following year, in the summer of 2008, severe
flooding led to the destruction of millions of hectares of farmland. These are large-scale,
co-variant risks concurrently affecting a large segment of the rural population, and the
impacts on low-income families can be severe, including loss of productive capacity and
interrupted income flow.
Agricultural or crop microinsurance would be both relevant and necessary in a country

like Moldova where agriculture plays such a significant role in the lives of people.
Without insurance, the victim receives no compensation. Therefore, the probably well-
intentioned state-subsidized agricultural insurance does in fact little to help lift farmers
and their families from the cycle of poverty. One natural disaster, one ruined harvest –
can destroy years of hard work and savings.
4.1.3 Business risks
Business risk – asset or property loss: In urban areas, major risks are related to losses of
fixed assets within a business, particularly property, an automobile or machinery. Any
loss to an income-generating item can lead to a loss of productive capacity and
interrupted income flow. These are insurable risks which could be covered by a
commercial property microinsurance product.
4.2 Coping strategies and their effectiveness

In Moldova, like in most developing countries, most people live day-to-day, struggling to
cover basic expenses, and without emergency funding readily available. Over time, low-
income people in Moldova have developed a variety of coping strategies to handle
uncertainty and to alleviate the negative consequences caused by a loss. People generally
mitigate their risks in informal ways through self or informal insurance, reactively rather
than proactively. What is most evident is that none of the coping mechanisms developed
are intentionally modified for a specific risk, but are utilized as a need arises. As
Margarita Lalayan of the Microfinance Center of the CEE and NIS succinctly stated, “It is
not risk management, it is case management.”136 Both ex-ante and ex-post strategies
employed of low-income persons are described below, followed by an evaluation of their
effectiveness.
4.2.1 Ex-ante strategies
Ex-ante coping mechanisms are those employed before a risk occurs. Two main ex-ante
strategies are utilized: savings and the purchase of fixed assets. Firstly, like in Romania,
the savings mentality in Moldova is quite well-developed. People save in times of plenty
to use in times of want. Not only money is saved, but also dried food, seeds for the next
136 Interview with Margarita Lalayan, Microfinance Consultant, Microfinance Center of the CEE and NIS.
Date: March 19, 2009 via telephone.
year’s harvest, and household items such as soap and matches. Often, these items are
carefully saved over time. Victor Burunsus of the World Bank recounted a telling story
where he attended a memorial service and received, among other gifts, a wooden
matchbox – something that had not been manufactured for two decades. (In Romania
and Moldova, in remembrance of someone’s passing, the tradition is that the family
distributes food and little presents to guests and locals).
Most people do not save in a structured or systematic fashion. Savings are often all
placed in “one pot” – to be later used for whatever is most necessary. Many save a
portion of remittances received from family members working abroad. Traditionally, few
save through formal channels, although this number has gradually grown over time.
According to microfinance specialists, SCAs have helped improve savings in a formal
manner and are working to develop better products in the next few years.137
In addition to savings, rural persons may purchase fixed assets, such as gold and
livestock. Some entrepreneurs may invest in their business by buying machinery,
equipment or inputs. A number of respondents also purchase foreign currency, such as
US dollars or Euros, as they are considered safer and more stable than the Moldovan
currency. These assets are also accumulated during good times, and then sold during
times of need.
Beyond these two main strategies, people also reduce their expenditures during the non-
peak agricultural season, when income is less readily available. They may also
temporarily reduce expenditures in order to prepare for the increased costs associated
with lifecycle events, such as baptisms or weddings. For risks perceived as avoidable,
such as illness or some types of property loss, people will implement prevention
strategies. For example, upon leaving the house, they will turn off the electricity and gas
access in order to prevent fire.
Finally, another common strategy is income diversification, whereby persons hold a

variety of jobs. Mostly this is purely done out of necessity, as one occupation can rarely
provide enough income to cover living expenses. For example, one respondent was
employed full-time at the local SCA during the day. Mornings and evenings, she also
worked in the fields during the agricultural season, and in greenhouses collecting
vegetables during the winter. Her husband also had a full-time job, helped out in the
fields and greenhouses, and repaired automobiles around the village. Again, one can
137 Interview with Maria Johansson, Project Manager, International Advisory Services, Frankfurt School of
Finance and Management, and Team leader of financial education project with RFC. Date: March 11,
2009 via telephone.
argue that these strategies are not consciously-chosen, true risk-reducing strategies, but
rather mechanisms of coping with the obligations of life in Moldova.
4.2.2 Ex-post strategies
Ex-post coping mechanisms are those employed after a risk or loss occurs. In absence of
effective ex-ante strategies, most people in Moldova primarily employ ex-post strategies.
When a loss or tragedy occurs, the first strategy is to use the existing household income to
cover the initial costs. However, this is rarely sufficient. Because most low-income people
do not have formal protection through the government nor through the private sector,
people literally create their own “social safety nets” upon which they depend in time of
need. For instance, Moldova has a special tradition of “cumetrie.” Similar to most
Christian nations, when a child is baptized in Moldova, it is given a godmother and
godfather. However, in Moldova, a child also receives many – sometimes twenty or thirty
– “cumatrii,” who become part of the extended family. Being chosen as a “cumatru”
(male) or “cumatra” (female) solidifies the relationship between families. In difficult
times, people reach out to the “cumatrii,” where helping each other is not only based on a
system of reciprocity, but is also a matter of tradition and honor.
In addition, some may try to find extra jobs around the village, or may leave the village to
work temporarily in Chisinau. When this is unsuccessful, many will leave their families
to go work abroad. As Andrei Calin of the MMA, answered: “How do they cope? They
go to Russia!” Russia is the primary destination, while others leave for Italy and Spain.
Most return within three to nine months, having earned more in a few months abroad
than they would have earned working a full year in a similar job in Moldova.138
Another loss management strategy is the selling of assets. Some may sell household
items, gold and jewelry, as well as livestock. In more extreme cases, a family may need to
sell their automobile or land.
4.2.3 Assessment of coping strategies
When analyzing the effectiveness of a coping strategy, several characteristics are assessed;
namely, the timeliness, accessibility, affordability, totality of the coverage offered, and
finally, the overall efficiency of the strategy. The limited financial education and lack of
access to information among low-income persons in Moldova is exemplified by the very
limited ex-ante strategies employed when faced with difficult or tragedy. Even the few
ex-ante strategies employed – savings and the purchase of fixed assets – are limited in the
138 IOM. 2008. How Moldovan households manage their finances. IOM, Knowledge and Practices Survey Report
amount of coverage they offer, and certainly may not be the most efficient use of a low-
income person’s already limited resources.
Moreover, the current financial crisis has demonstrated the vulnerability of these ex-post
strategies. For the few borrowing through formal institutions, credits are less readily
available. Those working abroad, especially in Russia, are seeing their job opportunities
disappear.139 Finally, for those borrowing through informal channels, this will become
more challenging as everyone tightens their purse strings during the economic downturn.
The ex-post strategies are high-stress strategies. Accessibility can be limited, coverage is
rarely complete and the timeliness is uncertain. Additionally, these strategies are not very
affordable. Even through MFIs or SCAs, the interest rates are quite high, ranging from 20
to 32 percent annually. One assertion often restated during the interviews was that
Moldovans often live with a great deal of debt. Debt and borrowing can easily become a
vicious cycle, particularly difficult to manage for low-income persons who are typically
less prepared to weather economic shocks. In addition, borrowing and debt both carry
not only financial consequences, but also social and psychological side effects.
Low-income people in Moldova perceive their ability to manage their risks ambivalently.
On one hand, they realize it is unsatisfactory, as high-stress strategies can cause long-term
financial pressure. On other hand, they accept it as satisfactory because they simply do
the best they can, and are unaware that better coping mechanisms may exist. As one
interviewee mentioned, “They think they must predict what will happen in order to
insure themselves, and because many of these risks are unpredictable, they feel they
cannot manage them.”
In summary, there are serious gaps in the risk management strategies outlined above –
some of which can be filled by a formal insurance. A well-designed microinsurance
product could help lower-income persons allocate resources more efficiently, while
providing essential protection from idiosyncratic risk.
4.3 General attitudes about insurance
In Moldova, there is a low level of familiarity and consumer education regarding financial
services in general (e.g. banking, savings, budgeting, etc.). Currently, less than 15 percent
of the population uses banking services, although this number has steadily increased over
139 Russia was particularly hard-hit by the weak global economy, and construction – the industry employing
the most male migrant workers – has all but completed ceased. Skinner, S. 2008. Russian construction hit
by global economic crisis. International Construction Magazine, October 22.
the last decade, and is expected to increase further.140 Even so, the banking sector is
considered better developed than the insurance industry.
The general population has a basic understanding of insurance. This largely stems from
the Soviet era when life and property insurance, for instance, were mandatory.
Subscription was imposed, with payments automatically deducted from peoples’ salaries.
People were not given much choice or freewill and therefore, never fully developed their
understanding of the benefits of such products.
Today, people in Moldova generally only purchase insurance when they are obligated to
do so. Over the last few years, as the product range has widened and the industry has
gradually matured, there has been some growth in voluntary insurance premiums.
However, the majority of people still perceive insurance as an “extra.”
Even with one of the most common insurance product, RCA, people do not like to insure.
Many people in rural areas resent having to pay 500-1000 MDL ($45-$90) per year to
purchase insurance when their vehicles are 10 to 20 years old and are only driven locally.
Therefore, unless they must complete a vehicle inspection, they choose not to purchase
insurance and assume responsibility for losses.
This notion is confirmed by both insurers and the government, who estimate that only
approximately 50 percent of all automobiles in Moldova are covered by RCA insurance.141
As of December 31st, 2008, there were approximately 600,000 registered vehicles, 300,000
of which are driving without insurance. Mr. Stirbu, Director of the DIS, surmises that the
responsibility for this low number rests between the insurance firms, who have not
proactively reached out to potential consumers, and the government. For example,
penalties for non-insurance were not high enough to provide incentives to insure. Until
May 31st, 2008, the penalty was only 60 MDL ($5), which was subsequently raised to 200
MDL ($17) – still only about one third of the insurance cost.
Finally, many low-income households have little disposable income. As one interviewee
stated, “They are worried about day-to-day expenses, and therefore have no ‘space’ to
worry about insurance.”142 Efim Lupanciuc, Director of the RDC, confirmed this
statement: “They are forced to manage today without over-thinking about tomorrow.
They consider that they have other priorities besides insurance.” Therefore, people
perceive insurance as not particularly important, relegating it to an additional rather than
140 ProCredit Bank 2008 Annual Report. www.procredit.md. Retrieved March 2009.
141 Interview with Vladimir Stirbu, Director of Department of Insurance Supervision, National Commission
on Financial Markets. Date: March 26, 2009 in Chisinau, Moldova.
142 Interview with Serghei Tanasiev, Microinvest branch manager. Date: March 25, 2009 in Criuleni,
Moldova.
a necessary expense. Some view insurance as a luxury. And because they perceive
themselves as poor, and insurance as expensive, they do not consider these products to be
conducive to their incomes or relevant for their lifestyles. Certainly, this mentality simply
reflects the lack of understanding and knowledge of insurance.
4.4 Reasons for lack of insurance
There is both a need and a demand for insurance, but there are several obstacles to
overcome. Table 11 outlines the responses from interviews with over 50 stakeholders
regarding the lack of insurance in Moldova.
Table 11: Reasons for lack of insurance in Moldova

Rank Reason Total #
responses
(% of total)
1 Lack of financial education and insurance tradition 35 (35%)
2 Lack of trust in institutions 24 (24%)

(both government and private sector)
3 Lack of financial resources 17 (17%)
4 Inactivity on behalf of insurance firms to target low- 12 (12%)

income persons (products, marketing, promotion)
5 Underdeveloped institutional and governmental 6 (6%)
Capacity
6 Lack of access (geographic) 3 (3%)
7 Competitive products offered by banks and SCAs 2 (2%)
TOTAL 99
Source: Compiled from author’s interviews, March-April 2009
Lack of financial education – 35 percent of respondents: The main reason given to

explain the lack of insurance in Moldova was the lack of financial education – or as SCA
director Alina Lungu, stated, “the lack of financial spirit.”143 People in general are
uncertain about how to manage their resources efficiently. They are not aware of what
products are available and what benefits these products may provide. Numerous
interviewees reiterated that people are not even cognizant of the risk they face. As
microfinance specialist, Roxana Savescu, stated, “The understanding of risk management
143 Interview with Alina Lungu, Executive director, Dubasarii Vechi SCA. Date: March 18, 2008 in Dubasarii
Vechi, Moldova.
– and the need to be prepared – is very low.”144 Stela Culicov of ARTAS explained that
people are concerned with paying something for nothing, not understanding the
underlying advantages of insurance.145
Lack of trust in institutions – 24 percent of respondents: The second most common

response given was a lack of trust in institutions. The period of independence and
privatization brought several unpleasant experiences which left an indelible mark upon
the credibility of both government and private sector institutions. For example, in the
early 1990s, a transition currency was established through the National Savings Bank
(“Banca de Economii”), which underwent a huge and swift devaluation, leaving people
without their long-earned life savings. Additionally, corruption is still a widespread
problem. As Nina Rabeja of Vitoriasig stated, “when you don’t trust your government, it
is hard to trust anyone else.”146
The problem does not conclude here. During the 1990s, countless “corner shop”
insurance firms appeared and then disappeared, leaving many people without the money
they had entrusted to these institutions. During the 1998 Russian ruble crisis, numerous
banks went bankrupt due to the rapid depreciation of the Moldovan leu, leaving many
impoverished. Clearly, after such experiences, people become disillusioned. This
distrust, especially pronounced among the older generation who hold these unpleasant
experiences in recent memory, discourages people from trusting financial service firms.
Some think a new generation must come before this hesitance will change.
Moreover, and perhaps not surprisingly, awareness among the general population
regarding the laws and their rights is not very high. The government has made progress
the last decade in modernizing its judicial system; legislation in Moldova now provides
the same protection to plaintiffs as western legal systems do. However, Moldova is not a
litigious society, and many claims are handled informally outside the judicial system. The
majority of cases that do reach the formal system are those related to automobile
accidents.147 Even with official dispute, respondents reported negative experiences of
having to “run after” the money due them.148
Lack of financial resources – 17 percent of respondents: As has been found in other

microinsurance studies, lack of money was not the top-ranked reason for lack of
144 Interview with Roxana Savescu, University professor and free-lance microfinance consultant. Date:
March 23, 2009 via telephone.
145 Interview with Stela Culicov, Insurance Specialist, ARTAS Insurance Company. Date: March 23, 2009 in
Chisinau, Moldova.
146 Interview with Nina Rabeja, Director of Vitoriasig, Criuleni branch. Date: March 18, 2008.
147 AXCO Insurance Market Report: Moldova Non-Life (P&C). 2009.
148 Interviews with SCA directors of Slobozia Dusca and Dubasarii Vechi. Date: March 17th, 2009.
insurance. Interestingly, however, there tended to be a discrepancy between respondents:

Those with an external perspective (members of international organizations or insurance
firms) often cited lack of money as a secondary or tertiary reason.
Potential microinsurance consumers (Moldovan citizens such as SCA members) often

blamed the lack of money as the primary reason. For example, Nina Rabeja of Vitoriasig
stated, “Money is earned the hard way here. To convince someone to take another leu out
of their pocket, it’s very difficult.149” SCA directors interviewed echoed this statement,
explaining that by the time interest and commission are calculated, loans are already
expensive. Adding insurance would therefore only increase the financial burden for the
villagers.150
However, as described in chapter 4.1, Moldovans have rich cultural traditions that involve
copious celebrations. Somehow, money is found or made available for these events – this
fact suggests that rural families may indeed have the financial resources to pay for
insurance. This brings us back full circle to the lack of insurance tradition and the low
level of financial education. It can be argued that they consider insurance expensive
because they do not realize the important protection it offers.
Other responses: Several related responses were clustered in the same category, as they
essentially articulated the same general idea: 12 percent of respondents stated that there
has been inactivity on behalf of insurance companies to reach out to low-income
individuals. Six percent of respondents mentioned the overall underdevelopment of the
insurance market, as well as the weak regulatory capacity of the CNPF. Furthermore,
others stated that low-income persons in rural areas do not have access to insurance
products (3 percent of respondents). Finally, 2 percent of respondents felt that banks and
SCAs offered products for low-income persons that compete with insurance products.
All of the listed reasons are linked and lead to a cycle. The lack of financial education
prevents lower-income persons from realizing that better strategies exist to manage risks
and improve living standards. They do not trust institutions, and therefore, are less likely
to gain new positive precedents with credible insurance firms who could help rebuild the
lost trust. And because this segment is so inactive within the insurance market, the
already passive insurance firms continue to overlook them, perceiving them perhaps as
inaccessible and unprofitable. Without a concerted effort between the public and private
sectors, it will be challenging to overcome these obstacles.
149 Interview with Nina Rabeja, Director of Vitoriasig, Criuleni branch. Date: March 18, 2009 in Criuleni,
Moldova.
150 Interview with Executive Directors and Chief Accounts of the Molovata and Cosernita SCA. Date: March
25, 2009 in Molovata, Moldova.
4.5 Demand and potential microinsurance market
There is both a need and a demand for microinsurance in Moldova. On-site research
showed that life, health, property and agricultural insurance were in demand. A separate
survey conducted by the EBRD in July 2007 demonstrated that about 20 percent of
respondents stated they were “very interested” in health and life insurance.151
ZFS estimates that an individual earning approximately $7 to $10 per day (PPP) is a
potential microinsurance consumer. In Moldova, about 65 percent of the population
fulfills this attribute, representing about 2.5 to 2.7 million persons who earn about $5 to
$10 per day (PPP).
In general, most people stated that they would purchase more insurance if the products
were more affordable, more easily accessible, and if they could trust the providers. The
reasons for lack of insurance described above in chapter 4.4 imply that there are several
obstacles to overcome for a microinsurance product to be successful. However, there are
ways to mitigate these obstacles, which will be further discussed in chapter 5.
151 Moldova National Public Opinion Survey on Remittances. 2007. The European Bank for Reconstruction and
Development, July.
Recommendations: Introducing microinsurance to Moldova 59
5 Recommendations: Introducing microinsurance to
Moldova
5.1 Product recommendations

The characteristics of an adequate microinsurance product are as follows:
• Simple products specifically designed to target lower-income persons
• Contract wording needs to be straightforward, clearly disclosing information

about premium payments, claims entitlement and other benefits
• Automation for monitoring and claims processing built into the product
• Affordable and accessible
Some of the main issues with the current product offering are that most products are not
affordable, and that most firms require payment in full and upfront. A microinsurance
product would need to offer both quality and flexibility, but at a reasonable cost and with
a flexible payment plan, such as monthly or quarterly installments. Furthermore, as with
any microinsurance product, accessibility is key. Therefore, it is necessary to establish a
trustworthy and far-reaching network of distribution channels which would reliably
provide access throughout Moldova. Recommended microinsurance distribution
channels are discussed in more detail in chapter 5.2.
It is recommended to first introduce one simple product, such as personal accident or

credit life, and give people time to accumulate positive experiences in order to build trust
and familiarity with insurance. In the longer term, integrated insurance products, such as
those with a savings component, would be ideal as they address the intangibility of
insurance and provide additional benefits to the policyholder.
Table 12 below outlines the primary idiosyncratic risks faced by low-income persons in
Moldova, as well as their respective recommended microinsurance product. These
products are further discussed in chapters 5.1.1 to 5.1.4.
Table 12: Summary of risks and recommended insurance products

Risk Recommended microinsurance product
Death of a breadwinner Life insurance

Credit life insurance
Serious illness Health insurance
Harvest loss, natural Agricultural insurance

disaster
Property damage, loss Property insurance
(household and business)
5.1.1 Health insurance
Although the Moldovan government subsidizes health insurance for all citizens, the very
low subscription rate of 67 percent tells a different story. There are a plethora of reasons
why the turnout is so disappointing. The relative high cost, combined with the
supposedly inefficient, bureaucratic system, does not paint a particularly positive
outcome. Those in rural areas are particularly vulnerable, since access to both healthcare
and financial resources can be difficult.
Providing a product that allows for the improved flexibility and quality offered in the
current supplementary health insurance products would maybe help bridge the gap in
the current health insurance system and expand coverage to more Moldovans. The
important characteristics of a health microinsurance product would be:
• Access to a wider range of quality facilities
• Few or no geographic limitations
• Shorter waiting times
• Treatment at both family and specialist physicians
• Hospitalization, diagnostic testing, laboratory testing
• Hospital transportation
• Coverage of a wider range of medications (preferably through providers separate

from those providing treatment and diagnostics)
• No upfront payment for treatment required
• Monthly or quarterly premiums payment through a safe, accessible intermediary
Currently, a significant coverage gap exists between the CNAM and supplementary
policies. For example, only the state system covers maternity, pediatrics, some chronic
illnesses and specialized surgeries. Therefore, a person wanting comprehensive coverage
presently needs to purchase both policies. Ideally, a supplementary policy would serve as
a direct extension of the state system, where low-income persons would still have access
to critical treatments but also have the benefit of supplementary coverage. This
integration with the state policy would help reduce overall costs by reducing potential
duplication, but would also require close cooperation with the CNAM – an option that
requires further investigation.
The introduction of such a product would require the establishment of good relationships
with trustworthy health care providers, including doctors, clinics, diagnostic testing
centers, medical laboratories and hospitals. These providers would require capacity-
building, including:
• Ability to execute financial transactions with ZFS
• System to regularly prepare and send invoices to ZFS
• An inexpensive and efficient method for verifying coverage of insured party
• In addition, capacity-building is necessary at the intermediary-level
Historically, however, health insurance is a difficult product to introduce and manage

profitably. It requires significant investment in capacity-building, as noted above, as well
as the assistance of actuaries in order to price the product accurately. The publicly
available health statistics may not be applicable to lower-income populations, therefore
making an accurate risk assessment more difficult.
An option to consider would be introducing “hospital cash,” an insurance product ZFS is

currently developing in conjunction with its new partner Women’s World Banking.152
This product is a very simple form of health insurance whereby the policyholder receives
a pre-determined amount of money per day spent in the hospital, independent of the
actual medical expense incurred. This provides coverage for the most costly aspect of
health insurance – hospitalization and related treatments – while decoupling the product
from a government-sponsored or other private insurance program.
5.1.2 Agricultural insurance
In a country so dependent on agriculture, crop insurance is clearly vital. Although a

seemingly adequate agricultural insurance system is in place, the extremely low
penetration is most likely due to the lack of trust in institutions, as well as a lack of
knowledge among the rural population that such insurance even exists. The important
characteristics of an agriculture microinsurance product would be:
• Universally offered to both individuals and firms
• Straightforward method for calculating premiums
• Simple process for verifying land area, crops, etc.
• Product introduction accompanied by a widespread advertising campaign
• Efficient and quick claims processing mechanism
In order to reduce the chance of moral hazard, coverage should be limited to 70 or 80

percent of the total lost value (as the MAFI currently does). Furthermore, in order to
address the potential for fraud, insurance can be offered to small groups of farmers (or
152 Women’s World Banking (WWB) is a network of MFIs whose mission is to promote “poor women as
entrepreneurs and economic agents” by expanding their access to financial services and education. ZFS
launched the partnership with WWB in January 2009. www.swwb.org. Retrieved April 2009.
cooperatives), whereby fraud by one person automatically cancels the coverage for the
remaining group members.
One method for eliminating some of the potential subjectivity in the claims processing can
be addressed through weather index-based insurance. This type of insurance is based
upon changes in climate, such as rainfall, instead of changes in crop yield; for instance, a
certain amount of rainfall above the average amount would automatically trigger a claims
payout. This tends to be efficient while lowering opportunities for adverse selection and
moral hazard. However, this type of coverage may require expensive infrastructure, such
as weather stations, which could render the product unprofitable due to the small market
size. Another concern is the possible introduction of basis risk, where a policyholder
could receive compensation without having a loss or vice versa.
Another drawback is that agricultural insurance can be risky – because the product would
cover co-variant, rather than idiosyncratic, risks. In Moldova in particular, there have
regularly been significant natural disasters affecting agriculture in the last decades.
Therefore, it is important to undertake a more detailed risk assessment to evaluate
whether profitability is possible under such circumstances.153
5.1.3 Property insurance
As mentioned in chapter 4.1.1., about 90 percent of Moldovan families own their homes,
which are often their most valuable asset. The low penetration of property insurance can
be likely attributed to the lack of financial education and a lack of trust in institutions.
The important characteristics of a property microinsurance product would be:
• Simple process for verifying property value (preferably in a stable foreign

currency)
• Straightforward method for calculating premiums
• Ensure simple, quick and transparent claims process
• Offered to both individuals and firms
Annual premiums can be calculated as a percentage of the property value, as is currently

done by several insurance companies in Moldova, who offer annual coverage for
approximately .5 to 3 percent of the total property value. Like agricultural insurance,
coverage could be limited to 70 or 80 percent of the total lost value in order to reduce the
chance for moral hazard. Moreover, in order to avoid opportunities for fraud, insurance
153 The World Bank 2007 report entitled “Rural productivity in Moldova – Managing natural vulnerability”
provides a well-researched and detailed look at the agricultural risks in Moldova as well as an analysis of
different risk mitigation mechanisms.
can be offered to small groups of families, whereby fraud by one family automatically
cancels the coverage for the remaining families. This product would be best distributed
through SCAs in rural areas, and the groups could self-select from the roster of SCA
members. Further investigation is necessary to appraise what risks would be covered in
such a product (i.e. whether natural disasters would be included).
5.1.4 Life, personal accident and credit life insurance
Despite its rapid growth throughout the last decade, life insurance in Moldova is still in
its early stages. For it to truly reach its full potential, the pre-requisites are not only the
growth and maturity of the insurance industry, but also general, country-wide economic
development.154
The death of a breadwinner was identified as one of the major risks confronting low-
income families in Moldova, yet there are currently no life insurance products targeted
towards or affordable for the low-income population. A straightforward life insurance
product, such as personal accident, would be recommended in order to address this major
risk while addressing the need for simplicity and affordability.
Personal accident, often considered the “poor man’s life insurance,” offers coverage in
case of accident that results in death or disability, but not in case of illness. It is usually
easier to implement then a full-fledged life insurance product, as no health screening is
required and there is no opportunity for moral hazard. Preferably, the product would be
linked with a longer-term savings in order to overcome the intangibility of insurance
products. For example, Zurich currently offers a personal accident product in Bolivia
where the payout is the average balance of the policyholder’s savings account over the
previous six months. This not only provides protection but also serves as a good
incentive to save.
Credit life insurance product is often the first microinsurance product introduced in a
market. Credit life already exists on the Moldovan market, however, it is highly
underdeveloped. However, a suitable market exists for the launch of such a product as
microfinance is quite well-developed in Moldova and is expected to experience continued
steady growth. A credit life policy would need to be simply calculated and competitively
priced. Over a certain loan amount (i.e. 10,000 MDL or 15,000 MDL), premium payments
should be made in several installments.
154 Brainard, L. 2008. What is the role of insurance in economic development? Zurich, CH: Zurich
Financial Services.
5.2 Distribution channels recommendations
The characteristics of a satisfactory microinsurance distribution channel are as follows:
• Trustworthy reputation
• Capacity for safe, reliable financial transactions for collections and disbursements
• Far-reaching network for widespread accessibility
MFIs are often natural partners for the sale and distribution of microinsurance, and
Moldova is no exception. The main distribution channels recommended for Moldova are
the primary MFIs, Microinvest and the RFC, as well as their respective SCAs. A
partnership with the globally-oriented and well-established ProCredit Bank, would also
be considered. Collectively, these institutions address the most critical obstacle to
developing microinsurance in Moldova: the lack of trust in institutions. An affordable,
targeted product offered through a respected institution, where payment can be made
simultaneously with loan repayments, is simply a good selling proposition for a customer.
MFIs and SCAs will be further described in chapters 5.2.1 and 5.2.2, with more extensive
information offered in Appendix 4. Alternative distribution channels, including the Post
Office of Moldova, will be discussed further in chapters 5.2.3 and 5.2.4.
5.2.1 Microfinance institutions
5.2.1.1 Overview of MFIs
The microfinance sector in Moldova has evolved rapidly throughout the last decade.
According to the most recent listing by the CNPF, there are sixteen non-bank MFIs.
Among these, three are the most prominent: Microinvest, the Rural Financial Corporation
(RFC) and ProCredit:
• Microinvest: Founded by the Soros Foundation, Microinvest is an MFI whose

mission is to provide loans to small- and micro-enterprises in order to increase the
socioeconomic potential and the living standards in Moldova.155
• The Rural Finance Corporation (RFC): the RFC is a cooperative-style joint stock
company created in 1997 with the mission to promote rural development by
serving as a central finance facility for SCAs and by collaborating with the
government to help alleviate poverty.156 SCAs are both the clients and the owners
155 Microinvest Annual Report 2007. www.microinvest.md. Retrieved February 2009.

156 The Rural Finance Corporation website. www.microfinance.md Retrieved February 2009.
of the RFC, who has grown significantly: from just a handful of SCAs at its
founding to over 250 today.
• ProCredit: Founded in December 1999 by a coalition of international investors,

ProCredit part of a global network of “neighborhood banks,” who recently
received its commercial banking license in Moldova, but continues to focus on
lower-income clients traditionally underserved by its competitors.
There are also several large commercial banks in Moldova who provide microfinancing
options, including Banca Sociala, Fincom Bank, Mobiasbanca Société Generale and
Moldova Agroindbank. Traditionally, these institutions focus on corporate clients and
higher-income consumers. In recent years, however, organizations such as the EBRD
have helped banks develop their microfinance capabilities. For example, in 2006, the
EBRD rolled out a program with Mobiasbanca and Banca Sociala whose objective was to
introduce microcredit products previously not available. Nadya Litvac, Principle Banker
at the EBRD, confirmed that microinsurance was not offered by either bank at the time of
the program, but that several commercial banks have started to offer credit life insurance
in the last one or two years.157
Although most of the major MFIs, with exception of the RFC, focus on direct lending,
many are also implicated in lending to SCAs. Figure 10 below outlines the affiliation of
SCAs among MFIs. Of the 400 active SCAs, about 260 SCAs are linked to the Rural
Finance Corporation (RFC) while 90 work with Microinvest. The remaining associations
obtain financing from commercial banks. Microinvest and the RFC each have NGO-arms
that provide financial education training and tailored consulting services to ensure the
viability and sustainability of the SCAs. (More information on SCAs can be found in
chapter 5.2.2 and in the appendix chapter 4).
157 Interview with Nadya Litvac, Principle Banker, European Bank of Reconstruction and Development
(EBRD), Moldovan representative office. Date: April 8, 2009 via telephone.
Figure 10: Distribution of SCAs among microfinance institutions
Source: Compiled by author during field research in Moldova, March 2009
5.2.1.2 Policies on credit life insurance at MFIs
In general, no MFIs or commercial banks have clearly defined or enforced policies

regarding credit life insurance, and most requirements are decided upon on a case-by-
case basis.
For direct lending, guarantors are required instead, who become responsible for loan
repayment in case of the original borrower’s death or incapacity. The number of
guarantors depends on the loan recipient, amount borrowed and other factors.
Occasionally, collateral and insurance are also necessary, though this is often at the
discretion of the loan officer. At the RFC, for example, the loan recipient must provide
collateral valued at 100 to 130 percent of the loan principle, usually their home,
automobile or agricultural equipment. Loan recipients are sometimes required to insure
the item they are planning to purchase with the loan; for instance, if they are purchasing
property with their loan, that property will usually be insured.
Loans to SCAs are provided without collateral or mandatory insurance. When the SCAs
disburse the loans at the local level, they individually decide what type of insurance,
guarantors and collateral is necessary. Most require at least one guarantor to co-sign the
loan, and depending on the loan amount, some also require collateral. According to the
RFC’s 2008 Annual Report, the majority of their SCAs lend to their respective members
without requiring collateral or insurance.158
When asked why his organization does not mandate insurance, Artur Munteanu,
Microinvest’s CEO, explained that the additional cost of insurance would make
Microinvest’s loans more expensive compared to those available through other MFIs.
Regarding loans to SCAs, he affirmed that each SCA is its own entity who follows its own
procedures and policies, upon which Microinvest cannot intrude by mandating
insurance.159
When this same question was posed to Valeriu Iasan, Vice-President of Finance at the
RFC, he agreed with Mr. Munteanu’s statement regarding the independence of SCAs to
follow their own individual rules and regulations.160 Furthermore, Mr. Iasan stated that
since the SCAs are currently undergoing a process of consolidation and reorganization,
the timing is not ideal for introducing mandated insurance. He did disclose, however,
that once the RFC has the necessary financial and human capital, it plans to establish its
own insurance subsidiary that would then provide insurance to its SCAs and direct loan
beneficiaries.161
5.2.1.3 Criteria for microinsurance
Microfinance has an obvious link to microinsurance. Microinvest, in particular, already

expressed an interest in partnering with ZFS to expand products and services to existing
microfinance clients. Both Microinvest and the RFC are respected institutions and have
built stable relationships with their customers, validated by the high number of repeat
clients. In addition, since both already have the capacity for efficient and dependable
financial transactions, it would be feasible to accept insurance payments through them.
Moreover, they each have a sufficient network of branches. Microinvest has fifteen (four
in Chisinau and 11 regional), while the RFC has nine (a headquarters in Chisinau and
eight regional offices). ProCredit has an even larger network, with over 330 employees
and 27 branches, including 11 in Chisinau and 16 regional branches. This far-reaching
network of offices and staff signifies that most people in Moldova have access to a
Microinvest, RFC or ProCredit branch in their county.
158 The Rural Finance Corporation 2008 Annual Report. www.microfinance.md. Retrieved March 2009.
In addition, ProCredit uses innovative distribution channels to reach its remotely-located

client: it operates three “creditmobiles” that serve a quarter of Moldova’s territory by
literally bringing its banking services to the customers’ doorstep. Another creative tactic
is the practice of “one-day offices,” whereby ProCredit employees set up a booth or stall
at a local market in a city where there is no ProCredit branch. Photos can be seen in
Appendix 3.
Moreover, collectively, Microinvest and the RFC have a client base of over 100,000 people
– each of which is a potential microinsurance customer. Of the two, the RFC is the best
distribution channel for reaching rural areas as its main clients are 260s SCAs,
representing over 80,000 members (about 70 percent of all SCAs members nationally).
Microinvest, in turn, works with about 90 SCAs, representing about 18,000 customers.
Microinvest, with its 4,000 direct lending clients, is the best channel for access to
microentrepreneurs, particularly in urban areas (the RFC has 900 direct lending clients).
5.2.2 Savings and Credit Associations
5.2.2.1 Overview of SCAs
SCAs are simple financial institutions in rural villages, literally for the people and by the
people. Currently, there are approximately 500 SCAs in Moldova, from which about 400
are active (the most recent listing of the National Commission on Financial Markets lists
450 SCAs.)162 SCAs play a crucial role in the rural areas of Moldova, as most villagers do
not have access to larger commercial banks; these traditional financial institutions are
often not present in small villages, and if they are, few offer services specifically tailored
to the needs of low-income people. Furthermore, many villagers do not possess the
official documents required to apply for loan at a commercial bank. Conversely, because
SCAs are community organizations, all members are familiar with each other, and
therefore, credits can be given based upon reputation.
SCAs are organized territorially, and operate with a direct-democracy system of one-
person, one-vote. Each association has about 200 to 400 members. Being an SCA member
or working for an SCA, accords social status and respect within the community;163 it is
often considered that the most dynamic and determined members of the community join
SCAs.164 Members meet in a General Assembly once or twice a year in order to elect their
162 National Commission on Financial Markets website. http://www.cnpf.md/file/rapoarte/ListaAEI.pdf

Retrieved March 2009.
2009 via telephone.
164 Interview with Andrei Calin, SCA loan officer, Moldova Microfinance Alliance. Date: March 23, 2009 in
Chisinau, Moldova.
five-member Board of Directors (“Consiliul”), the three-member Internal Audit team

(“Comisia de Cenzori”), as well as the Executive Director and Chief Accountant. Some
larger SCAs also have cashiers and security guards. SCAs in Moldova employ almost
1,000 people.
Table 13 below presents select key figures about the SCAs listed in the CNPF database.
Over 66,000 microcredits were provided to members last year, representing a composite
loan portfolio of 619 million MDL ($54.9 million) – an average of 9,400 MDL ($830) per
loan. Only 2.4 percent of the loan portfolio was at risk. Less than six percent of SCA
members (approximately 7,200) made deposits; this is most likely due to the small
number of SCAs who hold “B” licenses which permit them to accept savings. The savings
portfolio is 2008 was 97 million MDL ($8.6 million), roughly 13,400 MDL each ($1,190).
Table 13: 2008 Key figures of Moldovan SCAs, December 2008

Item Figure
Number of SCAs reporting 423 SCAs
Total members 121,144 members
Total SCA employees 977
Loans
Number of loans 66,763
Average loan 9,400 MDL*
Total loan portfolio 619.2 million MDL*
Deposits
Number of deposits 7,204
Average deposit 13,400 MDL*
Total savings portfolio 97.0 million MDL*
* Figures were rounded to the nearest .1 million MDL
Source: CNPF Database of SCAs
Similar to the insurance industry, SCAs in Moldova are also characterized by a great deal
of dynamism. On June 21st, 2007, new legislation (law nr. 139-XVI) was passed that
outlined new regulations and restructured the SCA network by obligating each SCA to
apply for either an “A,” “B” or “C” license as of January 1st, 2008.
Of the 400 active SCAs, approximately 300 have applied for the basic “A” license
(application deadline was March 31st, 2009), which permits the SCA to disburse credits to
individual members within a designated local area. Another 90 SCAs have applied for
“B” licenses, which allow them to give credits, accept savings, operate within a wider
territory and set up branches. SCAs with a “C” license are allowed to serve both
individual and corporate members, and can offer savings, credits and financial consulting
services. This license permits them to establish branches anywhere in Moldova.
Currently, no SCAs have a “C” license, as there is a pre-requisite of having a “B” license
for at least one year.165 The National Federation of SCAs, a lobby and interest
organization, existed but was liquidated and disbanded in 2008 due to ineffectiveness.
Currently, the establishment of a Central SCA is underway, which will serve several
purposes including providing legal support and establishing a liquidity pool. 166
5.2.2.2 Policies on credit life insurance
There are no requirements – neither at the legislative nor at the microfinance institutional
level – mandating insurance for loans to SCAs, or for microcredits distributed by SCAs to
their members. A review of the 2008 loan portfolio of the SCAs in the CNPF database
demonstrates that only seven percent of the loan portfolio was “insured;” in this case,
“insured” means that collateral was included. During interviews, SCA directors admitted
that taking collateral is more of a formality, and that most SCAs have neither the time nor
the resources to properly verify and document the collateral value.167 Nevertheless, all
loan recipients are required to have loan guarantors.
A guarantor is generally a family member or close friend who vouches for the loan
recipient and is also an SCA member. Generally, a person can only serve as a guarantor
on a maximum of two concurrent loans. Any default on the loan – either by the original
recipient or by the guarantor – carries not only financial penalties but also the revocation
of certain member privileges: they can neither receive new loans nor sign as a guarantor
for others for a specified time period. Moreover, like in other community-oriented
financial institutions, peer pressure plays a noteworthy role in motivating loan recipients
to repay their obligations. “Non-payers” are socially reprimanded at General Assembly
gatherings. Because of this pressure, people do not particularly like signing on as loan
guarantors, but the system of reciprocity allows these arrangements to perpetuate.
Few SCAs have decided to require credit life insurance. For example, two of the SCAs
interviewed, Slobozia Dusca and Dubasarii Vechi, send their members to purchase
insurance at Vitorasig, in their local county capital of Criuleni. The annual cost is 1.5
percent of the loan principle, up to 25,000 MDL ($2,200); for loans over this amount, the
cost is equivalent to two percent of the principle.
The director of Vitoriasig, Mrs. Nina Rabeja, provided many examples of families who
were spared financial ruin because their loans were insured. She shared a story about a
165 Since the first B licenses were distributed in December 2008, the earliest applications for “C” licenses will
not be submitted until the end of 2009. Nonetheless, it is expected that only a handful of SCAs will
qualify in the next few years.
Finance and Management, and Team leader of financial education project with RFC. Interview date:
March 11, 2009 via telephone.
167 Interview with Executive Directors and Chief Accountantss of SCAs in Molovata, Cosernita, Slobozia
Dusca and Dubasarii Vechi, all linked with the Criuleni branch of Microinvest. Date: March 25, 2009.
family where the husband took out a larger loan for his grain mill. When he unexpectedly
passed away, his wife and son not only had to deal with their grief and loss, but also with
the significant financial burden of repaying this loan. It took them over three years.168
These types of sad stories would cease to exist if more SCAs required credit life insurance.
5.2.2.3 Criteria for microinsurance
Over twenty persons interviewed declared that SCAs would be the best distribution
channel for microinsurance because of their highly respected position within local
communities.169 As Severine Deboos of the ILO, stated, “SCAs are well-managed and
trustworthy. They’ve accumulated a great deal of goodwill in their local communities.”170
Furthermore, with over 400 active associations in Moldova, representing over 120,000
members, SCAs have a wide network and a large potential customer base. They also have
the capacity for financial transactions, although acceptance of insurance payments would
probably need to be coordinated through their respective MFI.
5.2.3 The Post Office of Moldova
5.2.3.1 Overview
Founded in 1993, the Post Office of Moldova (POM) is strategically oriented towards
broadening its range of services by implementing technologically advanced, non-
traditional services that provide customers with a higher-quality experience and better
value.171 Indeed, in an interview with Nelea Listovoi, Manager of Sales and New Services,
she substantiated this by outlining the long and diverse list of services that the POM
already offers, including payment of various bills, taxes, fees, state services, media
subscriptions and more.172 In rural areas, the POM even serves as a mini-mart, selling
essential products like soap, detergent and office supplies. Furthermore, it sells the
CNAM health insurance policies during the January-March promotional timeframe.
168 Interview with Nina Rabeja, Director of Vitoriasig, Criuleni branch. Interview date: March 18, 2009 in
Criuleni, Moldova.
169 Interviews conducted by author on-site in Moldova and via telephone, March and April 2009.
170 Interview with Severine Deboos, Technical Expert, Social Finance and Corporate Social Responsibility, the
International Labor Organization. Date: March 17, 2009 via telephone.
171 In 1992, Moldova became a member of the Universal Postal Union (UPU). The Post Office of Moldova
(POM) was founded on April 1st, 1993 and currently resides under the domain of the Ministry of
Informational Development. On April 11th, 1997, law nr. 1159-XIII was approved that implemented
changes to bring the POM to UPU standards.171 (Founded in 1874 and headquartered in Switzerland, the
UPU serves as a platform for cooperation among its members – postal offices and postal-related service
providers – to ensure a truly global network of products and services). The Post Office of Moldova
website. www.posta.md Retrieved April 2009
172 The Post Office of Moldova, marketing materials. Gathered March 2009.
In 2008, the POM recently signed an agreement with Microinvest whereby customers can
pay their loan and interest fees via the POM, making it therefore more accessible and
more convenient for clients without a bank account or who do not live in close proximity
to a Microinvest branch. In fact, almost any company can arrange payment acceptance or
distribution services via the POM. Some local firms have chosen to disburse dividends to
shareholders via the Post Office, for example. In order to arrange this service, firms must
sign a contract with the POM and pay a transaction commission. The POM even has
experience working with insurance firms: during the interview, Mrs. Listovoi mentioned
that just one week prior, they had started accepting payments for Donaris – a pilot project
which she hopes to expand to other firms in the future.173
5.2.3.2 Criteria for microinsurance distribution
If ZFS were to introduce microinsurance products to Moldova, the POM would be a

natural partner. Firstly, they have a trustworthy, solid reputation, as well as the capacity
for safe and reliable financial transactions. Furthermore, they have already accumulated
extensive experience in working with a diverse assortment of public and private
institutions – and are open to adding new services to their repertoire.
In addition, Natalia Cojocar of the Marketing Department affirmed that the POM has the
most extensive network of any firm or organization in Moldova.174 Indeed, with 1148 post
offices managed through 36 national subsidiaries, the POM provides services to residents
in over 1520 cities, towns and villages in Moldova.175 In fact, Mrs. Listovoi states, “Almost
every Moldovan lives within ten kilometers of a post office – and many, much closer.”176
5.2.4 Additional alternative distribution channels
As described in chapter 3, the only insurance product that is currently distributed through
alternative channels is RCA. These channels are practical because the product is simple
and mandatory. Nevertheless, they may not be suitable for launch of microinsurance in
Moldova – at least not until the concept is better-understood.
Maxi-taxis may another good distribution channel for the future. Maxi-taxis are often the
transportation of choice for Moldovans, as they are inexpensive, more flexible and have a
wider reach than buses or trains. Many migrant workers use maxi-taxis; therefore, they
may be good channels for selling travel medical or accident microinsurance.
173 Interview with Nelea Listovoi, Manager of the Sales and New Services, POM. Date: March 24, 2009.
174 Interview with Natalia Cojocar, Specialist, Marketing and Sales Department, the Post Office of Moldova
headquarters. Date: March 24, 2009 in Chisinau, Moldova.
175 The Post Office of Moldova website. www.posta.md. Retrieved April 12, 2009.
176 Interview with Nelea Listovoi, Manager of the Sales and New Services Department, The Post Office of
Moldova headquarters. Date: March 24, 2009 in Chisinau, Moldova.
Additionally, returning migrants, who often come home with better financial
management skills influenced from their time abroad, can then be targeted for the sale of
products such as property, agricultural, health and life insurance for their families.
In 2006, the EBRD estimated that over 580,000 people – over 20 percent of Moldovan
adults – received remittances on a regular basis; the average remittance recipient received
was $171, six times per year. About half received this money through a formal channel, a
number that has steadily increased throughout the last decade. Thirteen percent stated
they used the money for health or life insurance payments.177 Because of the ubiquity of
remittances in both rural and urban areas, a link could be established between remittances
received through formal channels such as banks and money transfer firms (e.g. Western
Union and MoneyGram), and the purchase of microinsurance products.
Distribution of microinsurance through insurance brokers is not recommended at this

time. Brokerages are at nascent stage within the industry, and are currently consolidating
due to the 2006 legislation. They require additional time to establish themselves as a
credible, trusted source for insurance products. However, in 2-3 years, collaboration with
the members of ABAR could be considered.
It is important here to note that significant capacity-building is critical for the

development of these abovementioned alternative distribution channels. Pre-requisites
include the training and monitoring of intermediaries as well as the implementation of
automated systems. In addition, time is necessary: time to allow for some rebuilding of
trust in institutions, as well as time for the population and authorities to become familiar
with the concept of microinsurance.
5.3 Marketing recommendations
Financial education: Regardless of the distribution channel, investment in financial

education is a must if a microinsurance product is to succeed not only in Moldova, but
anywhere. Raising the financial education and helping to build an insurance culture leads
to a win-win situation for all parties involved – buyers and suppliers.
Educational programs can be implemented in partnership with the government (e.g.

CNPF, the Ministry of Finance, the MAFI); for example, microinsurance could be
incorporated in the upcoming PR campaign from the CNPF and World Bank later in 2009.
Moreover, international NGOs can play a critical role. The World Bank and EBRD are
already working on financial education programs. Another example is the RDC program
sponsored by the SDC, with which ZFS already has a partnership.
177 Moldova National Public Opinion Survey on Remittances. 2007. The European Bank for Reconstruction and
Development, July.
Collaboration with Moldovan trade associations and rural organizations would also be
relevant. The UAM has financial education listed in its 2009 plan of activities;
microinsurance could certainly be included. An informational seminar could be held
during meetings of the National Federation of Moldovan Farmers, the Association of
Agricultural Producers or the National Agency for Rural Development. Collaboration
with the Ministry of Agriculture would be appropriate as well.
Marketing, media and advertising: The recommended media are television and radio,
which both have quite high penetration rates in Moldova. Since less than 20 percent of
the population has internet access, this medium is not currently recommended. After the
launch of microinsurance, something that could be kept in mind is the use of mobile
phones for direct and efficient communication with customers. For example, reminders
about premium payments, special offers or policy information updates could all be sent to
mobile phones.
Marketing collateral, such as posters and pamphlets, as well as print advertising in major
national newspapers and on billboards, would also be appropriate. For example, wallet-
sized cards containing essential policy information could be distributed to new customers.
They should be produced using simple, straightforward language, outlining product
features and benefits. The focus should be on representing things pictorially versus using
a lot of text.
Moreover, Microinvest in particular has a well-developed marketing department that

employs an array of instruments to reach both rural and urban customers. (It is hard to
spend a day walking or driving through Chisinau without seeing a billboard or bus
advertisement for Microinvest). Microinsurance education could be incorporated into
existing marketing and advertising materials in order to publicize microinsurance.
Customers could receive discounts when subscribing to multiple policies, while the MFI
would receive either a fixed commission on each transaction, or a percentage of the total
contract.
Both Microinvest and the RFC have NGO-arms that provide financial education training
and tailored consulting services to SCAs. These two organizations would therefore be
suitable partners for reaching SCA members. Holding short informational speeches at
General Assembly meetings as well as leaving marketing materials at SCA offices, could
be considered. Moreover, the SCA leaders who themselves are advocates of insurance
could be used as spokespersons to promote insurance throughout the network. For
example, during a focus group in Criuleni, two of the SCAs did not mandate credit life
because they were not aware of this product. Once they heard the experiences of another
SCA director, their interest was immediately piqued; they then planned to propose
mandated credit life at their organizations as well.178 Little marketing would be necessary
through SCAs, since word-of-mouth is the best instrument. As Nina Rabeja of Vitorasig,
affirmed, “If the service is good and the customer had a positive experience, he will bring
the whole village to you.”179
ProCredit is already a recognizable and respected brand not only in Moldova, but in
developing countries across the globe. It serves as a good role model for innovative
marketing and the use of alternative distribution channels, such as “creditmobiles” and
“one-day offices.” As Victor Burunsus of the World Bank stated, “ProCredit was the first
to discover the ‘niche’ for microfinance in Moldova. They showed how it can be both
socially good and profitable. They see the client differently, are very customer-oriented
and are present where and when the client needs them.”180 This is exactly what a
potential microinsurance provider would need to do to be successful.
A good opportunity may be to establish a global partnership with ProCredit, whereby

ZFS would develop the product and carry the risk, and ProCredit would sell and
distribute the products through their global network of banks. This option would need to
be further investigated. (Additional information on ProCredit can be found in Appendix
4, chapter 3).
In summary, a better understanding of risk management and the benefits of the insurance
would likely help convince the population that the small cost of insurance is not just
another financial burden, but a form of long-term protection of their families and of their
livelihoods. As Pavel Cater, Director of the BNAA, stated, “Insurance only seems
expensive when you sign the contract. When you need it, it always seems too cheap.”181
5.4 Operational model recommendations
There are several types of operational models possible for the implementation of
microinsurance. The following three are the most feasible for Moldova:
178 Interview/Focus Group Discussion with Executive Directors and Chief Accountants of SCAs of Molovata,
Cosernita, Slobozia Dusca and Dubasarii Vechi, all linked with the Criuleni branch of Microinvest.
179 Interview with Nina Rabeja, Director of Vitorasig, Criuleni Branch. Date: March 18, 2009 in Criuleni,
Moldova.
180 Interview with Victor Burunsus, Project Coordinator, Financial and Private Sector Development, World
Bank. Date: March 20, 2009 in Chisinau, Moldova.
181 Interview with Pavel Cater, Director of the BNAA, the National Association of Automobile Insurers of
Moldova. Date: March 24, 2009 in Chisinau, Moldova.
• Community-based organization (CBO) is a program whereby small groups of

individuals or families voluntarily pre-pay for coverage, thereby self-generating
the financing for the insurance. A few members are chosen to manage the CBO.
The great advantage associated with CBOs is that they are owned and managed by the
members, similar to SCAs in Moldova, which give them credibility within the community.
Such an arrangement could feasibly be implemented through existing SCAs, and
managed, for example, by SCA executive directors. However, these organizations would
be unregulated, and current SCA legislation may prohibit SCAs from offering products
and services beyond credits and savings. Additional drawbacks include having a very
limited risk pool and limited capital reserves. For this scheme to be potentially profitable,
it would be best if a central coordinating facility were established that could support the
individual CBOs, collect all premiums, and liaise with ZFS. Perhaps the upcoming central
SCA would be the best partner, if the legislation allows for this provision.
• Mutual benefit association (MBA) is a large organization of persons or families

who are associated for a shared advantage, in this case, insurance. The initial
capital reserves would be established through the fees paid by each member. Like
CBOs, the organization is owned by the members; unlike CBOs, they are
professionally managed and regulated through legislation.
The establishment of an MBA would require a review of the current legislation to

determine whether laws regulating such entities exist; otherwise, this would be a
significant drawback. Although the risk pool is larger than with CBOs, an MBA would
require significant investment in training and infrastructure.
• Partnership model: In this model, ZFS would partner with local intermediaries
who would serve as the delivery channels on-site in Moldova. ZFS, as the
commercial insurer, would carry the risk, receive premiums and pay claims, while
the partner would sell and service the product.
If ZFS is content with its current partnership with Garantie Insurance Company, it would
be recommended to utilize this established relationship for the launch of microinsurance.
Garantie has already expressed interest in further developing its relationship with ZFS. In
addition, it is a well-established and respected firm, although it would require training in
reaching out to the lower-income market. Preferably, at least one Garantie employee
would be dedicated to microinsurance.
Garantie, however, would not serve as the direct distribution channel, but rather would
be the on-site coordinator, managing the various delivery channels – namely, the MFIs
and SCAs recommended in chapter 5.2. Garantie would also liaise with the CNPF and
DIS to ensure that all activities fall within the boundaries of the law and to develop new
microinsurance legislation. Regarding the MFIs, ProCredit and Microinvest would focus
more on microentrepreneurs while the RFC would utilize its expertise working with
SCAs.
In addition, ZFS could both accept payments for insurance premiums as well as issue
claim payments via the POM. This would make the insurance products more convenient,
affordable and accessible. At a later stage, ZFS could even consider selling simple
insurance policies directly through the POM.
Conclusions 78
6 Conclusions
With an annual per capita income of approximately $2,500 (PPP), the Republic of
Moldova is consistently ranked as one of the poorest countries in Europe. About 30
percent of its 4.2 million population lives in poverty, and over 90 percent live on $10 a day
(PPP) or less. Research has shown that there is both a need and a demand for
microinsurance in Moldova, and that the estimated potential market is 2.5 million
persons.
Demand research revealed that the main risks faced by low-income households are death
or serious illness of a breadwinner, loss of the year’s harvest due to natural disaster, and
property loss. These could be addressed by simple, affordable and accessible
microinsurance products such as credit life, personal accident, health, agricultural and
property insurance. Currently most households use self-insurance and informal
insurance, such as savings, borrowing and purchasing of fixed assets, as their primary
risk management tools – all of which are limited in their effectiveness.
Supply research demonstrated that the market is still small and underdeveloped, but has
a great deal of potential. Most insurance firms offer on a traditional product range, many
relying on automobile and other compulsory insurances. Distribution channels and
marketing instruments utilized are also quite traditional. No insurance companies
investigated were making a marked effort to reach out to the lower-income segment.
However, in the last three years, there has been a marked consolidation among firms and
brokerages while total premiums have steadily increased. Simultaneously, there has been
a great deal of activity surrounding the launch of trade associations and industry-
specialized publications. All of this reflects the dynamic nature of the market. A driving
factor of these changes is the 2006 insurance legislation which outlined a plethora of
regulations to raise Moldova’s market to international standards. Programs to improve
the operational efficiency and regulatory capacity of the supervisory authority are also in
progress.
Microinsurance is a mostly unknown concept in Moldova. Although there is no specific

microinsurance legislation, the government has expressed openness to the possibility of
developing one in the future. The CNPF would require technical and financial assistance
to do so. Microfinance, however, is quite well-developed and regulated, which is often a
pre-requisite for the successful launch of microinsurance into a new market. Therefore,
the primary channels recommended for microinsurance distribution would be MFIs and
their affiliated network of SCAs.
Conclusions 79
Several obstacles need to be overcome for microinsurance to be successful in Moldova.

Firstly, there is a distinct need for investment in financial education and the building of an
insurance culture, which is currently underdeveloped. This could be feasibly effectuated
through cooperation with trade associations and international organizations, as well as
through current government programs. In addition, trustworthy and reliable distribution
channels need to be utilized in order to repair some of the lack of trust in institutions.
It is recommended to first introduce one simple product, such as personal accident or

credit life, and give people time to accumulate positive experiences with insurance, before
introducing additional products. In the longer term, integrated insurance products, such
as those with a savings component, are recommended as they address the intangibility of
insurance and provide additional benefits to the policyholder.
It is also recommended that Zurich or its on-site partner collaborate closely with both the
government on developing relevant legislation for microinsurance and microinsurance
intermediaries. Finally, a potential microinsurance product would need to offer both
quality and flexibility, at a reasonable cost and with a flexible payment plan – something
not available through current product offerings.
Bibliography: Articles, reports and studies 80
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Website Organization Date retrieved
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Bibliography: Interviews 87
Bibliography: Interviews
Organization Name Title Address Phone Interview date

and location
Actuary Association of Moldova Oleg Verejan President Chisinau, Moldova March 25th, 2009
Chisinau, Moldova
ARTAS Insurance Company Stela Culicov Insurance Specialist Alexander Pushkin Street, 4 +37322 222487 March 23rd, 2009
MD-2009, Chisinau, Moldova Chisinau, Moldova
Asigest Insurance Brokers Roman Gutu Founder and former Armeneasca Street, 18 +37322929521 March 24th, 2009
President Chisinau, Moldova Chisinau, Moldova
Asigurare.md – the Online Natalia Dubencu Website Administrator and Chisinau, Moldova March 19th, 2009
Insurance Portal Vestecom-Plus Broker Chisinau, Moldova
ASITO Insurance Company Victoria Pascaru Underwriter, Health Mitropolit Banulescu-Bodoni +37322226212 April 10th, 2009
Insurance Department Street, 57/1 (telephone)
MD-2005, Chisinau, Moldova
Association of Insurance Brokers Veaceslav Gamurari President Chisinau, Moldova March 17th, 2009
Chisinau, Moldova
Donaris Insurance Company Serghei Boico Customer Service Sciusev Street, 56/3 +37322225794 March 16th, 2009
Representative Chisinau, Moldova Chisinau, Moldova
European Bank of Nadya Litvac Principle Banker Vlaicu Pircalab Street, 63 +37322210000 April 8th, 2009
Reconstruction and Sky Tower building, 10th floor (telephone)
Development MD-2012, Chisinau, Moldova
Frankfurt School of Finance and Maria Ekström Project Manager International Advisory +4969154008692 March 11th, 2009
Management Johansson Services (telephone)
Sonnemannstr. 9-11, 60314
Frankfurt am Main, Germany
Garantie Insurance Company Vitalii Robu Sales Director Alexander Pushkin Street, +37322 270055 March 26th, 2009
47/1 Chisinau, Moldova Chisinau, Moldova
Garantie Insurance Company Mihail Josan Insurance Director Alexander Pushkin Street, +37322270055 March 26th, 2009
47/1 Chisinau, Moldova Chisinau, Moldova
Garantie Insurance Company Annaslav Yakovenki Corporate Reinsurance Alexander Pushkin Street, +37322270055 March 26th, 2009
Director 47/1 Chisinau, Moldova Chisinau, Moldova
Garantie Insurance Company Alexandru Balteanu Reinsurance and Corporate Alexander Pushkin Street, +37322270055 March 26th, 2009
Clients 47/1 Chisinau, Moldova Chisinau, Moldova
Grawe Carat Insurance Angela Solonari Marketing Manager Alexandru cel Bun Street, 51 +37322279332 March 19th, 2009
Chisinau, Moldova
Grawe Carat Insurance Diana Malcuci Insurance Agent, Life Alexandru cel Bun Street, 51 +37322279332 March 19th, 2009
Insurance Department Chisinau, Moldova
Grawe Carat Insurance Doina Versteac Assistant to Director Alexandru cel Bun Street, 51 +37322279332 March 19th, 2009
Chisinau, Moldova
International Labor Organization Severine Deboos Technical Expert, Social Regional Office for Central +3613014905 March 17th, 2009
Finance and Corporate and Eastern Europe (telephone)
Social Responsibility
International Monetary Fund Johann Mathisen Chief of Mission in Piata Marii Adunari Nationale +37322232496 March 23rd, 2009
Moldova 1, Government Building, room Chisinau, Moldova
123
Chisinau, Moldova
International Organization for Ghenadie Cretu Labor Migration Program Ciuflea Street, 36/1 +37322 232940 March 26th, 2009
Migration Coordinator MD-2001, Chisinau, Moldova Chisinau, Moldova
Microfinance Center for CEE Margarita Lalayan Microfinance Consultant Koszykowa 60/62 m.52 +37491420118 March 20th, 2009
and NIS 00-673, Warsaw, Poland (telephone)
Microfinance Alliance of Andrei Calin SCA Loan Officer Pushkin Street, 16 +37322229904 March 23rd, 2009
Moldova MD-2012, Chisinau, Moldova Chisinau, Moldova
Microfinance Alliance of Vladimir Vescu Human Resources Pushkin Street, 16 +37322229904 March 23rd, 2009
Moldova Manager MD-2012, Chisinau, Moldova Chisinau, Moldova
Microinsurance Centre Michael McCord President 1045 West Lynndale Drive +19202572179 February 26th, 2009
Appleton, WI 54914, USA (telephone)
Microinvest (MFI) Artur Munteanu CEO Pushkin Street, 16 :+37322212764 March 16th, 2009
Microinvest (MFI) Igor Gudumac Marketing and Pushkin Street, 16 +37322212764 March 27th, 2009
Fundraising Officer MD-2012, Chisinau, Moldova Chisinau, Moldova
Microinvest (MFI) Daniela Dutca Internal Audit Pushkin Street, 16 +37322212764 March 23rd, 2009
Microinvest (MFI) Olga Fretescu Assistant Pushkin Street, 16 +37322212764 March 25th, 2009
Microinvest (MFI) Sergiu Tanasiev Branch Manager Criuleni, Moldova March 25th, 2009
Criuleni, Moldova
Moldasig Ion Cebotari Manager, Supplementary Mihai Eminescu Street, 2 +37322889812 March 19th, 2009
Health Insurance MD-2009, Chisinau, Moldova Chisinau, Moldova
Moldasig Oleg Galbura Manager, Agricultural Mihai Eminescu Street, 2 +37322889812 March 19th, 2009
Insurance and Risk MD-2009, Chisinau, Moldova Chisinau, Moldova
Moldasig Elena Ignatieva Principal Specialist, Health Mihai Eminescu Street, 2 +37322889812 March 19th, 2009
Insurance for Travel MD-2009, Chisinau, Moldova Chisinau, Moldova
MOLDCARGO Insurance Ion Buza Manager, Agricultural Vasile Alecsandri Street, 97 +37322279293 April 14th, 2009
Company Insurance Department MD-2012, Chisinau, Moldova (telephone)
National Commission of Andrei Darie Director of External Boulevard Stefan cel Mare, 77 +37322228825 March 20th, 2009
Financial Markets Relations and European MD-2012, Chisinau, Moldova Chisinau, Moldova
Integration
National Commission of Veronica Cuhal Advisor to the Council Boulevard Stefan cel Mare, 77 +37322228825 March 20th, 2009
Financial Markets President MD-2012, Chisinau, Moldova Chisinau, Moldova
National Commission of Vladimir Stirbu Director of Department of Boulevard Stefan cel Mare, 77 +37322228825 March 26th, 2009
Financial Markets Insurance Supervision MD-2012, Chisinau, Moldova Chisinau, Moldova
National Office of Automobile Pavel Cater Director Stefan cel Mare Street, 182 +37322212258 March 24th, 2009
Insurers Chisinau, Moldova Chisinau, Moldova
Post Office of Moldova Nelea Listovoi Manager of Sales and New Stefan cel Mare Street, 134 +37322251272 March 24th, 2009
(headquarters) Services Chisinau, Moldova Chisinau, Moldova
Post Office of Moldova Natalia Cojocar Specialist, Marketing and Stefan cel Mare Street, 134 +37322251272 March 24th, 2009
(headquarters) Sales Department Chisinau, Moldova Chisinau, Moldova
ProCredit Bank Alexandra Ogladina Customer Service Mihai Eminescu Street, 35 +37322204482 March 20th, 2009
Representative Chisinau, Moldova Chisinau, Moldova
Rural Development Center Efim Lupanciuc Executive Director 10/5 Ion Creanga Street +37322595559 March 25th, 2009
Chisinau, Moldova Chisinau, Moldova
Rural Finance Corporation (MFI) Valeriu Iasan Vice-President and 10/5 Ion Creanga Street +37322595559 March 25th, 2009
Financial Director Chisinau, Moldova Chisinau, Moldova
Roxana Savescu Assistant Professor and Lucian Blaga University +40269252612 March 23rd, 2009
Freelance Microfinance Sibiu, Romania (telephone)
Consultant
Savings and Credit Association – Nicolae Gustiuc Executive Director Cosernita, Moldova March 25th, 2009
Cosernita Criuleni, Moldova
Savings and Credit Association – Lidia Tricolici Chief Accountant Cosernita, Moldova March 25th, 2009
Cosernita Criuleni, Moldova
Savings and Credit Association – Alina Lungu Executive Director Dubasarii Vechi, Moldova March 18th, 2009
Dubasarii Vechi Dubasarii Vechi, Moldova
Savings and Credit Association – Nina Postica Cashier Dubasarii Vechi, Moldova March 18th, 2009
Dubasarii Vechi Dubasarii Vechi, Moldova
Savings and Credit Association – Tatiana Procop Executive Director Molovata, Moldova March 25th, 2009
Molovata Criuleni, Moldova
Savings and Credit Association – Zinovia Izman Chief Accountant Molovata, Moldova March 25th, 2009
Molovata Criuleni, Moldova
Savings and Credit Association – Victor Cauia Executive Director Slobozia Dusca, Moldova March 18th, 2009
Slobozia Dusca Slobozia Dusca, Moldova
Savings and Credit Association – Eugenia Frunze Chief Accountant Slobozia Dusca, Moldova March 18th, 2009
Slobozia Dusca Slobozia Dusca, Moldova
Soros Foundation of Moldova Liliana Gherman Public Health Program 32 Bulgara Street MD-2001, +37322270031 March 17th, 2009
Director Chisinau, Moldova Chisinau, Moldova
Soros Foundation of Moldova Ana Capcelea Program Coordinator 32 Bulgara Street MD-2001, +37322270031 March 17th, 2009
Chisinau, Moldova Chisinau, Moldova
Soros Foundation of Moldova Vitalie Slobozian Harm Reduction Program 32 Bulgara Street +37322270031 March 17th, 2009
Coordinator MD-2001, Chisinau, Moldova Chisinau, Moldova
Swiss Re Reinsurance Company Michael Schwarz Junior Client Manager, Mythenquai 50/60 CH-8002, +41432852595 March 5th, 2009
Ltd. Insurance and Specialty Zurich, Switzerland (telephone)
Vestecom Plus Insurance Veaceslav Gamurari Director and President of Bucuresti Street, 13/1 +37322225480 March 17th, 2009
Brokers ABAR Chisinau, Moldova Chisinau, Moldova
Vestecom Plus Insurance Natalia Dubencu Insurance Broker Bucuresti Street, 13/1 +37322225480 March 17th, 2009
Brokers Chisinau, Moldova Chisinau, Moldova
Vestecom Plus Insurance Sergiu Cascaval Insurance Broker Bucuresti Street, 13/1 +37322225480 March 17th, 2009
Brokers Chisinau, Moldova Chisinau, Moldova
Vitoriasig Nina Rabeja Director 31 August Street, 83 Criuleni, +37324822547 March 18th, 2009
Moldova Criuleni, Moldova
World Bank Victor Burunsus Project Coordinator, Pushkin Street, 20/1 +37322200706 March 20th, 2009
Financial and Private MD-2012, Chisinau Chisinau, Moldova
Sector Development
World Bank Doina Cebotari Consultant Private Sector Pushkin Street, 20/1 +37322200706 March 26th, 2009
Development, Europe and MD-2012, Chisinau, Chisinau, Moldova
Central Asia
Zurich Financial Services Brandon Matthews Head of Global General-Guisan Quai 34 +41446392010 January 19th, 2009
Microinsurance Practice CH-8022 Zurich, Switzerland Zurich, Switzerland
Zurich Financial Services Raymond Risler Microinsurance Market General-Guisan Quai 34 +41446392011 February 18th, 2009
Development Specialist CH-8022 Zurich, Switzerland Zurich, Switzerland
Zurich Financial Services Mario Wilhelm Microinsurance Consultant Jakarta, Indonesia February 24th, 2009
(telephone)
Appendix 1: Methodology 93
Appendix 1: Methodology
The purpose of the study was to assess the feasibility of introducing microinsurance in
Moldova. In order to analyze whether there is a case for microinsurance, it was necessary
to gain a better understanding of the following issues:
• Main risks and lifecycle events facing low-income persons in Moldova, and the
immediate and longer-term impact of these risks
• Current coping strategies used to manage these risks both before (ex-ante) and
after (ex-post) they happen, as well as the effectiveness of these strategies.
Establish whether there is a gap that could be filled by microinsurance products
• The general knowledge and attitude about insurance, and the primary reasons for
the low penetration of insurance in Moldova
• The present status of the insurance market in Moldova, including the role of
government, the regulatory environment, the products and distribution channels
currently utilized, as well as the strengths and weaknesses of the industry
Both primary and secondary research sources were utilized. The majority of the primary
research was conducted on-site in Moldova, in Chisinau and its environs, during the
weeks of March 16th and March 23rd, 2009. Qualitative research techniques were used,
including focus group discussions (FGD) and guided individual interviews. Focus
groups typically had 5 to 12 participants, with age ranges of 40 to 70 years old, and were
held with employees and members of four SCAs, all of which are linked to Microinvest.
FGDs were held in the local Microinvest office of Criuleni, north of Chisinau. An
overview of the four SCAs is outlined below in table 14.
Table 14: Overview of SCAs interviewed, March 2009

SCA Overview
Molovata • “A” license

• 204 members
• 106 loans disbursed in 2008
• Tatiana Procop, Executive Director
• Zinovia Izman, Chief Accountant
Cosernita • “A” license
• 202 members
• Nicolae Gustiuc, Executive Director
• Lidia Tricolici, Chief Accountant
• Maria Antocica, Cashier
Dubasarii Vechi • “B” license
• 394 members
• Average loan 11,000 MDL ($976)
• Alina Lungu, Executive Director
• Nina Flore, Chief Accountant
• Nina Postica, Cashier
Slobozia Dusca • “A” license
• 260 members
• Victor Cauia, Executive Director
• Eugenie Frunze, Chief Accountant
Source: Compiled by author during on-site research in Moldova, March 2009
In addition, guided interviews were held with over 55 stakeholders, such as insurance
firms, brokerages, and the government, as well as experts in the field, including
international organizations, NGOs and microfinance consultants. Interviews that were
not possible on-site in person were conducted via telephone. A listing of all persons and
organizations interviewed can be seen in the bibliography, while the guided interview
questionnaire can be seen below on pages 95 to 97 (also available in Romanian).
Appendix 2: Additional tables and figures 98
Appendix 2: Additional tables and figures
Figure 11: Risks, uncertainties and responses
Source: Adapted by author from Churchill, C. (ed.), 2007.
Figure 12: Characteristics of an insurable risk
Source: Churchill, C. (ed.), 2007. Protecting the poor: A microinsurance compendium.

Table 15: Listing of insurance firms, March 2009
Accept Alianta
Acord-Grup Afes-Moldova ARTAS
Insurance Moldcoop
ASITO Asterra Grup Auto-Siguranta Delta Donaris Group
Edict Euroasig Grup Exim-Asint Galas Garant
Garantie Grawe Carat I.P.B. Delta Klassika Moldasig
Moldova-
MOLDCARGO Notabil-Polis Sigur-Asigur Transelit
Astrovaz
Victoria Vitoriasig
Source: Listing of licensed insurance and reinsurance firms, March 26th, 2009. National
Commission on Financial Markets. www.cnpf.md.
Table 16: Listing of insurance brokerages, March 2009

AMP Broker Amsicons Anavimax Aris-Broker Asigest
Asigcampion-
Asigvital Asmart-Broker Autobin Grup AV Brokers
Grup
Blajco Asist Brokerasgi Broker Expert Broker Polis Centrasig
Duvistar Elita-Broker Ervax Grup EuroLife Extra-Asig
IRS Life Insurance

Imperbroker Luciada Modernasig
Management Group
Okho B Ebpony Omnis Procompasgrup Prodeviz Profilider
Starasig T.A.T.I Group Top Broker Vestecom-Plus WVP
Source: Listing of licensed insurance and reinsurance brokers, March 23rd, 2009. National
Commission on Financial Markets. www.cnpf.md.
Figure 13: Selection from UAM 2009 Plan of Activities
• Maintain a permanent dialogue and a healthy cooperation between the UAM

and the Moldovan government, parliament and the CNPF regarding insurance
legislation and normative acts
• Establish partnerships for cooperation and knowledge exchange with other

associations, such as those in Austria, Romania, Russia, etc.
• Create a professional code of ethics, a UAM website, and a detailed database of

providers, clients and claims to promote a transparent system
• Establish a permanent dialogue with the press and the public in order to
promote the image and reputation of insurance and the UAM member firms,
accomplished through diverse activities, such as generating positive publicity
via articles and interviews in print publications, holding roundtable discussions
and conferences about milestones within the insurance industry, etc.
• Contribute to the financial literacy and insurance knowledge of the Moldovan

population through special educational television and radio campaigns
• Develop a dedicated training and educational facility for insurance specialists,

as well as a partnership with universities
• Form the Organization of Young Insurers, to promote the profession at the

student and young professional level
Figure 14: Selection from ABAR 2009 Charter
• Collaborate closely with both national and international insurance firms and
organizations in order to advance common interests
• Develop the potential of the association’s members by analyzing the challenges

faced by insurance intermediaries, and collectively problem-solving
• Participate in the development of insurance legislation in collaboration with the

CNPF and DIS
• Contribute to the raising of the insurance culture in Moldova
• Partake in publications, seminars and conferences to promote insurance

Source: CIA World Factbook
products – Moldova,
and brokers, 2008.
as well www.cia.gov/library
as attract qualified specialists into the sector
Appendix 3: Photos 101
Appendix 3: Photos
1. Map and flag of the Republic of Moldova

2. Photos of microfinance clients (from Microinvest MFI)

3. A look at the insurance industry in Moldova
Sample policy from the CNAM
Symbol and slogan of the insurance industry:
“Egali, Eterni, Solidari”
ARS Assecuratiorum (“The Art of Insurance”) – Insurance Trade Magazine

Asigurare.md – Online Insurance Portal
Sample marketing materials from Donaris and Moldasig insurance firms

4. A look at microfinance in Moldova
Sample marketing materials from Microinvest MFI

Sample marketing materials from ProCredit Bank
ProCredit “one-day offices” and “creditmobile” (adapted from 2007 Annual Report)
SCA Loan application
5. Miscellaneous
Sample marketing materials from the Post Office of Moldova

Appendix 4: Additional information on MFIs and SCAs 108
Appendix 4: Additional information on MFIs and SCAs
This appendix provides additional information on the history, operations, products and
financial performance for the three major microfinance institutions – Microinvest, the RFC
and ProCredit – as well as Savings and Credit Associations in Moldova.
1. Microinvest and the Moldova Microfinance Alliance
1.1 The Moldova Microfinance Alliance
The Moldova Microfinance Alliance (MMA) was founded in 1997 as an NGO with the
objective of creating and developing SCAs and entrepreneurial cooperatives to support
economic development in Moldova. While the Moldova Agroindbank provided the
financing, the MMA provided consulting services and training. Since its inception, the
MMA has launched over 230 SCAs and 15 entrepreneurial cooperatives, which in turn,
has provided employment opportunities for over 500 people (e.g. SCA directors and
accountants) and loans for over 25,000 Moldovan entrepreneurs.182 For their work in
innovatively expanding financial services to low-income clients, the Consultative Group
to Assist the Poorest (CGAP) recognized the MMA with the “Rural Pro-Poor Innovation
Award” in 2003.
In 2002, a market study conducted by the MMA revealed a high demand for financial
services focused on micro- and small-businesses, which were being underserved by the
traditional banking sector. Leveraging its five years of experience within the microfinance
industry, the board of directors of the MMA decided to establish its own microfinance
institution. In April 2003, Microinvest was born.
1.2 Overview of Microinvest
Founded by the Soros Foundation, Microinvest is an MFI whose mission is to provide

loans to small- and micro-enterprises in order to increase the socioeconomic potential and
the living standards in Moldova.183 A micro-enterprise is defined as having up to 9
employees and 3 million MDL ($266,000) in assets; a small enterprise has up to 49
employees and 25 million MDL ($2.2 million) in assets. Microinvest receives funds from
both international lenders, including Oxfam Netherlands, Deutsche Bank and the KIVA
Organization, as well as domestic lenders, such as the National Savings Bank of Moldova,
Moldindconbank and FinCom Bank. Current shareholders of Microinvest include the
Soros Foundation, Oikocredit, France’s International Solidarity for Development and
182 Microinvest website. http://www.microinvest.md/about/partners/amm/en.html. Retrieved March 2009.

Investment Company, Driehaus Capital Management, Development Finance Equity

Partners and members of the Microinvest management team. In addition, Microinvest
works with several project partners, such as Planet Finance and the Microfinance Center
of the CEE and NIS.
Microinvest currently services over 4000 clients in both the rural (60 percent) and urban
(40 percent) areas of Moldova through their 106 employees and fifteen branches – four in
the capital city of Chisinau and eleven spread throughout all regions of Moldova. These
clients – and the over 14,000 beneficiaries – stem from both the agricultural sectors (55
percent) and the non-agricultural sectors (45 percent), including trade and commerce,
services, tourism and production.184 Microinvest advertises its products and brand
primarily through mass media channels, such as radio, newspapers, relevant magazines
(such as those related to economic, agricultural or entrepreneurial matters), billboards and
posters throughout urban and rural areas. In addition, it provides marketing collateral
(leaflets, pamphlets, etc.) through its branch network, and relies heavily on its loan
officers, as well as word-of-mouth by satisfied clients.185
1.3 Key Figures and Financial Results
Since its inception, Microinvest has achieved impressive growth: from managing
approximately $1.1 million in assets in 2004 to managing over $41 million in 2008. 2008
alone saw a 70 percent growth in assets from 2007. Shareholder equity has also increased
at an impressive rate: from about $375,000 in 2004 to over $7.2 million. For 2008,
Microinvest had over 4,300 active loans, and an ROA of 3.3 percent and an ROE of 13.5
percent. 186 As of April 2009, Microinvest has a portfolio of over $25 million, of which 2.8
percent is at risk (defined as all loans with at least $1 past due compared to the total
portfolio size). Figure 15 and 16 below outline the evolution of Microinvest’s loan
portfolio and number of active contracts. For 2009, Microinvest projects about $43.2
million in total assets, $7.6 million in total equity and a loan portfolio of over $26 million.
Additionally, although Microinvest strives to distribute this risk throughout different
regions, sectors and tenure, the PAR (portfolio at risk) percentage could potentially
increase if the financial crisis continues to deepen in Moldova in 2009.187

185 Interview with Igor Gudumac, Marketing and Fundraising Officer, Microinvest. Date: March 27, 2009 in
Chisinau, Moldova.
187 Interview with Artur Munteanu, CEO of Microinvest. Interview: March 16, 2009 in Chisinau, Moldova.
Figure 15: Microinvest loan portfolio, 2004-2009*
30
Millions USD 25 26*
25
20
15
10.8
10
4.2
5 2.7
0.8
0
2004 2005 2006 2007 2008 2009
*Figures for 2009 are projected
Source: Microinvest Annual Report, 2007, and interviews with Artur Munteanu and Igor
Gudumac of Microinvest.
Figure 16: Microinvest number of active contracts, 2004-2009*
5000 4,500*
4,300
4000
3000 2,772
2000 1,555
1,288
1000 408
0
2004 2005 2006 2007 2008 2009
* Figures for 2009 are projected
Source: Microinvest Annual Report, 2007, and interviews with Artur Munteanu and Igor
Gudumac of Microinvest.
1.4 Loan Products
Microinvest offers a variety of innovative loans products, such as group loans, direct
loans, community venture capital, guarantees and more. About 80 percent of their loan
portfolio originates from direct lending to entrepreneurs, while the remaining 20 percent
is generated from lending to SCAs.188 Over 40 percent of its direct lending is to sole
proprietorships, with the rest disbursed through cooperatives, LLCs and others. Loans
range from 12 month short-term loans (41 percent), medium-term loans of 13 to 36
months (52 percent) and longer term loans of 36 to 60 months (7 percent). Loan amounts
also vary quite broadly, with 46 percent being over 11,000 MDL ($976), 42 percent from
2,000 to 11,000 MDL ($177-$976), and only 12 percent being micro-loans of up to 2,000
MDL ($177).189 According to Artur Munteanu, Microinvest’s CEO, the average
Microinvest loan is $4000 ($354) for 18-20 months.190
For its direct lending operations, Microinvest furnishes a range of three products: the
“Simplus” loan is designated for working capital and purchasing fixed assets, and
provides up to 70,000 MDL ($6210) for 24 months. Although insurance or collateral is not
obligatory, a guarantor must co-sign the loan agreement. Funds can be made available to
the entrepreneur within one to three days of approval. The “Start” loan is designed
specifically for persons looking to launch their own micro- or small enterprise. Loans up
to 600,000 MDL ($54,240) are available, with terms up to 36 months. The loan guarantee is
125 percent the loan value. Finally, for established entrepreneurs who are looking to
further expand their business, the “Forte” loan offers them the ability to borrow up to 2.4
million MDL ($213,000), also for up to 36 months and with a 125 percent guarantee.
Microinvest also offers tailored loans for SCAs, cooperatives and informal groups. For
informal groups, such as an entrepreneur cooperative, Microinvest offers loans up to
25,000 MDL ($2,200) for a maximum period of 24 months. No collateral or guarantor is
necessary, as peer pressure within the group acts as the guarantee. Microinvest currently
works with 90 of the approximately 500 SCAs in Moldova. It offers them loans at an
annual interest rate of 24 percent, in amounts up to 4 million MDL ($355,000); terms can
be short (up to 12 months) or medium (13-36 months). In order to qualify for a loan, an
SCA must be licensed, active, and have at least a three-year credit history. The
relationship between Microinvest and their SCA partners is managed by the MMA, who
works closely with each of the associations through the Microinvest branch network in
188 Interview with Andrei Calin, SCA loan officer. Date: March 23, 2009 in Chisinau, Moldova.
189 Microinvest Annual Report 2007. www.microinvest.md. Retrieved February 25, 2009.
190 Interview with Artur Munteanu, CEO of Microinvest. Date: March 16, 2009 in Chisinau, Moldova.
order to provide a variety of financial education training and tailored consulting services
to ensure the viability and sustainability of the SCAs.
2. The Rural Finance Corporation and the Rural Development

Center
2.1 Overview of the Rural Finance Corporation
The Rural Finance Corporation (RFC) was created in 1997 by several SCAs, with the
financial and technical support of the Moldovan government and the Rural Finance
Project of the World Bank. Its mission is to promote rural development in Moldova by
serving as a central finance facility for SCAs in rural areas and by collaborating with the
government to help alleviate poverty.191 Throughout the last decade, the RFC has grown
significantly: from about ten SCAs at its foundation to over 250 today. Each SCA is also a
shareholder, making the RFC a cooperative-style joint stock company where its clients are
also the owners. In general, the RFC’s funding is derived from a variety of sources,
including the Credit Line Directorate at the Ministry of Finance, as well as the EBRD, the
EFSE as well as several local commercial banks. 2008 saw a significant increase (55
percent compared to 2007) in the amount of borrowed resources, driven by the increased
of demand for loans at the SCA-level. This increase was covered by new funding received
from the EFSE as well as Oikocredit.
The RFC is able to provide service to clients throughout Moldova through its Chisinau
headquarters and its eight regional offices, collectively employing over 50 employees.
The RFC currently counts about 260 SCAs as their primary clients, who in turn represent
over 70 percent of all active SCA members in Moldova (84,000 members).192 From these,
the majority of the SCAs (approximately 210) hold “A” licenses, while the remaining fifty
SCAs have “B” licenses.193 Although the majority of the SCA members work within the
agricultural sector, the RFC also actively seeks to provide loans to entrepreneurs whose
businesses contribute to infrastructure-building and social development in rural
villages.194 The RFC does not greatly concentrate on marketing campaigns, since the
majority of its clients are within the SCA network. It does not utilize television or radio
advertising, and employs limited print advertising (in newspapers, magazines and
billboards) and some point-of-sale marketing materials available through their regional
offices.
191 The Rural Finance Corporation Website. www.microfinance.md Retrieved February 2009.
192 Rural Finance Corporate Annual Report 2008. www.microfinance.md Retrieved February 2009.
193 Interview with Valeriu Iasan, Vice-President of Finance of the Rural Finance Corporation. Interview:
March 25, 2009 in Chisinau, Moldova.
194 The Rural Finance Corporation Website. www.microfinance.md Retrieved February 2009.
During the seasonal peak of 2008, the RFC had an active loan portfolio of over 433 million
MDL ($38.4 million), over 100 million MDL larger than in 2007.195 Its net profit was 21.1
million MDL ($1.9 million) in 2008, a 50 percent increase over the previous year, and
equity was 77.5 million MDL ($6.9 million), an increase of 34 percent from 2007. For 2008,
its ROA was 5 percent and ROE was 27.2 percent.
About 70-75 percent of the RFC’s loan portfolio is from lending to SCAs, while the
remaining 25-30 percent is generated through direct lending. Figure 17 below provides an
overview. At the SCA level, the average loan was about 9200 MDL ($816) in 2008 – an
increase of over 30 percent from the previous year.196 For direct lending, the average loan
was approximately 131,000 MDL ($11,600, over 45 percent higher than in 2007), reflecting
the fact that the RFC maintains its direct lending focus on micro-, small- and medium-
sized enterprises. Presently, the RFC also counts about 900 entrepreneurs among its
direct lending clients, representing a loan portfolio of 110 million MDL ($9.7 million).197
Figure 17: RFC portfolio composition, 2005-2008
400
Million
350
300 MDL 106
250
200
102 100
150
262
100 86
50 116 129
71
0
2005 2006 2007 2008
SCA lending Direct lending
Source: Adapted from the Rural Finance Corporation 2008 Annual Report.
195 Rural Finance Corporate Annual Report 2007 and 2008. www.microfinance.md Retrieved February 2009.
196 Interview with Valeriu Iasan, Vice-President of Finance of the Rural Finance Corporation. Date: March
197 Interview with Valeriu Iasan, Vice-President of Finance of the Rural Finance Corporation. Date: March
2.3 The Rural Development Center
In 1999, the RFC established the Rural Development Center (the RDC), an NGO that
works closely with SCA members and direct loan beneficiaries. It plays a similar role for
the RFC that the MMA plays for Microinvest. Whereas the RFC provides the financing,
the RDC provides training and consulting services on business plan development,
financing and operations. For example, the RDC can help match an entrepreneur to a
specific developmental program, such as the World Bank first-time borrower program.198
The RDC works closely with various international organizations, including the World
Bank and International Fund for Agricultural Development (IFAD). Currently, it has a
project with the Swiss Agency for Development and Cooperation (SDC) which is being
rolled out in two phases: the first is focused on financial education training at the SCA
level. Through workshops, SCA employees are learning financial analysis principles,
budgeting, marketing, business planning and new product development. Launching later
in 2009, the second phase will focus more on automating SCA operations by providing
computer training and accounting software as well as training on how SCAs can manage
their liquidity and attract savings. The underlying idea to further consolidate SCAs by
upgrading the best and biggest SCAs to a “B” license, and then, in the words of RDC
Executive Director, Efim Lupanciuc, “gluing together the smaller SCAs to the larger
ones.”199
2.4 Loan Products
At an annual interest rate of 24 percent, the RFC offers both short-term (2-12 months) and
medium-term (13-36 months) loans to their SCAs, which respectively lend to their
members per their individual loan applications. Short-term loans are primarily utilized
during the agricultural season, and therefore, require a balloon repayment at maturity;
medium-term repayment plans are more flexible. Short- and medium-term loans each
represent approximately 50 percent of the loan portfolio. The RFC also offers medium-
term (13-36 months) credit lines to SCAs.
For those who have outgrown the lending capacity of their local SCA and require larger
loans for their business, the RFC provides several direct lending options, all offered at a
22-24.5 percent annual interest rate. Short-term and medium-term loans up to 36 months
are available, as well as long-term loans for up to ten years. For clients with a solid credit
history with the RFC, a credit line for working capital is available with terms up to 36
198 Interview with Efim Lupanciuc, Executive Director of the Rural Development Center. Date: March 25,
2009 in Chisinau, Moldova.
months. In order to quality the recipient must contribute his own capital in the amount of
20 percent of the principle, which then serves as the minimum balance of the credit line.
3. ProCredit Company and Bank
3.1 Overview of ProCredit, Worldwide and in Moldova

Operating as a public-private partnership, ProCredit Holding is the parent company of a
global network of over 20 ProCredit banks, from Kosovo to Kyrgyzstan, Mexico to
Mozambique. By mid-year 2008, ProCredit Group had assets totaling more than 4.5
billion Euros, and an equity base of over 370 million Euros.200 In Eastern Europe,
ProCredit has subsidiaries in eleven countries, and in 2007, was the leading provider of
banking services to micro-, small- and medium-sized enterprises, with over 535,000
outstanding loans.201 ProCredit Bank follows a different philosophy than most
commercial retail banks: their goal is to target micro, small and medium-sized businesses,
as well as the general population, in developing countries and transition economies in
order to expand access to financial services. Throughout its global network, ProCredit
operates a neighborhood bank concept, whereby all branches are positioned as “the
financial institution in the neighborhood.” Over time, ProCredit has developed an
advanced, specialized credit technology that it uses throughout all of its branches to
analyze the borrower’s capacity for debt, cash flows and potential credit risks in order to
provide socially responsible products. It prides itself on its culture of transparency, open
communication, cultural sensitivity and excellent customer service. In its 2007 annual
report, ProCredit states “ProCredit is characterized by a responsible, long-term attitude
towards business development and client relationships…We aim to contribute to the
economic development of the countries in which we work.”202
In Moldova, ProCredit was the first and still is the largest, microfinance institution.
Founded in December 1999 by a coalition of international investors, ProCredit Bank
actually start as Micro Enterprise Credit of Moldova (MEC), focused on providing
microloans to populations traditionally underserved by commercial banks. In July 2004, it
was renamed ProCredit Company, helping to consolidate the socially responsible chain
under one brand name and image. At the end of 2007, ProCredit received its
comprehensive banking license, allowing it to become a full-fledged retail bank offering a
broader array of services to its clients (including savings and debit accounts, international
transfers, and additional services for businesses), while still maintaining a clear focus on
microfinance clients. Currently, most of ProCredit Company’s branches are in the process
of being transformed into ProCredit Banks.
200 ProCredit Moldova website. www.procredit.md. Retrieved February 2009.

201 ProCredit Bank Moldova 2007 Annual Report. www.procredit.md. Retrieved February 2009.

In 2007, ProCredit’s total assets reached over $50 million, an increase of over 40 percent
compared to 2006; this rapid growth was primarily driven by the large increase in the
loan portfolio: ProCredit disbursed over 15,000 loans, with a loan portfolio of $37 million,
an increase of 22 percent over the previous year.203 The average loan size is
approximately $3,000, and over 96 percent of loans were under $10,000 – reinforcing the
fact that ProCredit is indeed a provider of microcredits.
ProCredit currently has over 330 employees and 27 branches in Moldova – including 11
banks in the capital and 16 regional branches (of which only six are banks, while the rest
can only disburse credits). ProCredit is innovative in reaching remotely-located clients: it
operates three “creditmobiles” in Moldova that serve a quarter of Moldova’s territory by
literally bringing its banking services to the customers’ doorstep. Another creative tactic
is the practice of “one-day offices,” whereby ProCredit employees set up a booth or stall
at a local market in a city where there is no ProCredit branch.
3.3 Loan Products
ProCredit offers a variety of loan products. In fact, there are no maximum and no
minimum loan amounts; a customer can apply for a loan of as little as 5000 MDL ($443).
Loan terms are between 12 and 48 months, and depend on the industry of the borrower:
agricultural workers usually need seasonal loans of 8-18 months, while those in
construction, for example, apply for longer-term loans. Loan repayment is usually
completed monthly, although the timetable can be flexible, tailored to the client’s
particular cash flow schedule.
4. Savings and Credit Associations in Moldova
4.1 Organizational structure and licensing

SCAs are simple financial institutions in rural villages, literally for the people and by the
people. Currently, there are approximately 500 SCAs in Moldova, from which about 400
are active. The most recent listing of the CNPF lists 450 SCAs.204 SCAs play a crucial
role in the rural areas of Moldova, as most villagers do not have access to larger
commercial banks; these traditional financial institutions are often not present in small
villages, and if they are, few offer services specifically tailored to the needs of the lowest-
income people. Furthermore, many villagers do not possess the official documents
required to apply for loan at a commercial bank. Conversely, because SCAs are
204 National Commission on Financial Markets website. http://www.cnpf.md/file/rapoarte/ListaAEI.pdf
Retrieved March 2009.
community organizations, all members are familiar with each other, and therefore, credits
can be given based upon reputation.
SCAs are organized territorially, and operate with a direct-democracy system of one-
person, one-vote. Each association has about 200 to 400 members. Being an SCA member
or working for an SCA accords social status and respect within the community;205 it is
often considered that the most dynamic and determined members of the community join
SCAs.206 Members meet in a General Assembly once or twice a year in order to elect their
Board of Directors (“Consiliul,” comprising of five members), the Internal Audit team
(“Comisia de Cenzori,” consisting of three members), as well as the Executive Director
and Chief Accountant. Some larger SCAs also have cashiers and security guards. SCAs
in Moldova employ almost 1,000 people. The organizational structure of SCAs in
Moldova can be seen in figure 18 below, while figure 19 provides an overview of the three
types of SCA licenses.
Figure 18: Organizational structure of SCAs in Moldova
Source: Adapted by author from Organizational structure of the SCA in Slobozia Dusca (valid for
all SCAs in Moldova)
2009 via telephone.
206 Interview with Andrei Calin, SCA loan officer, Moldova Microfinance Alliance. Date: March 23, 2009 in
Chisinau, Moldova.
Figure 19: Overview of SCA licensing requirements
Source: Adapted by author from Law of Savings and Credit Associations, nr. 139-XVI of June 21st,
2007. www.cnpf.md.

According to the database maintained by the CNPF, which reports information from 423
SCAs nationally, there were over 121,000 SCA members as of September 30th, 2008, of
which approximately 55 percent were females. In 2008, over 66,000 microcredits were
given throughout the SCA network, representing a composite loan portfolio of 619 million
MDL ($54.9 million) – an average of 9,400 MDL ($834) per loan. Only 2.4 percent of the
loan portfolio was at risk, categorized into one of four categories, depending on the
severity of default. Less than six percent of SCA members (approximately 7,200) made
deposits; this is most likely due to the small number of SCAs who hold “B” licenses which
permit them to accept savings deposits. The savings portfolio is 2008 was 97 million MDL
($8.6 million), roughly 13,400 MDL each ($1190).
The 2008 balance sheet of all Moldovan SCAs reported 703 million MDL ($62.4 million) in
assets, 609 million MDL ($54.1 million) in liabilities and 94.6 million MDL ($8.4 million) in
equity. A summary of the balance sheet can be seen below in table 17 while table 18
provides an overview of the 2008 loan portfolio in terms of insured and uninsured loans.
Table 17: Summary of 2008 SCA balance sheet

Item Total, MDL*
Assets
Cash 9.4 million
Shares 4.2 million
Bank deposits 59.2 million
Loan portfolio 619.2 million
Total Assets 703.9 million
Liabilities
Savings deposits 97.0 million
Deposits for insuring loans 54.2 million
Bank credits and loans received 439.9 million
Interest due 14.1 million
Other 4.1 million
Total Liabilities 609.3 million
Equity
Interest rates 12.1 million
Reserves established by law 25.2 million
Other reserves 25.9 million
Other equity 145,000
Retained earnings 10.1 million
Net profit 21.2 million
Total Equity 94.6 million
Table 18: Overview of 2008 SCA loan portfolio

Loan category Total loans, MDL* Insured, MDL* Uninsured, MDL*
Standard 604.1 million 44.4 million 559.7 million
Supervised 10.8 million 219,000 10.6 million
Substandard 1.8 million 540,000 1.3 million
Dubious 1.4 million 244,000 1.1 million
Comprised 1.2 million 113,000 1.1 million
Total 619.2 million 45.5 million 573.7 million
* Figures were rounded to the nearest .1 million MDL
4.3 Operations: Membership, savings and credits, policies and procedures

One becomes a member of a local SCA by submitting an application and a copy of
identification (“buletin”) to the SCA office. Applications all must be approved by the
Board of Directors. Once approved, the member pays a one-time membership fee
(approximately 80-120 MDL), which helps the SCA accumulate a small capital base. For
microcredits, the process is generally the same for all SCAs: every year, SCAs accept loan
applications during a specified timeframe, usually January through March. After
individual review by the Chief Accountant, the applications are then transferred to the
Board of Directors for approval. At the end of the application period, the SCA applies for
financial resources from its microfinance institution, and once received, disburses the
individual microcredits to its members. Loan terms are generally 12 months, but can also
be tailored to the individual needs of the applicant. If additional applications are received
after the designated period, loans can still be offered as long as capital is still available and
repayment can still be achieved within the calendar year. For those SCAs with “B”
licenses who can also accept savings, the procedure is similar: a member first sends a
letter requesting to deposit funds with the SCA, which must be approved by the Board of
Directors. Once received, deposits are used to finance additional loans within the
member network. Annual interest rates for deposits are generally 20-22 percent.
Although many procedures are similar for all SCAs, each association is permitted to
establish policies and guidelines by which their particular association will operate.
Details such as interest rates, profit margins, loan maximums, timing of meetings,
repayment schedules, penalties for late payments, insurance requirements and other rules
are all established collectively and voted upon at General Assembly meetings.
For example, in the “A” license association in Slobozia Dusca, just northwest of Chisinau,
has 260 active members and distributed 167 loans in 2008. The maximum loan amount
for an individual is 25,000 MDL ($2,220) and 40,000 MDL ($3,550) for a family. In
addition, a new member can only receive a loan of 10,000 MDL ($887) until he or she has
proven him- or herself trustworthy of a larger one.207 The SCA in Dubasarii Vechi, not far
from the border with Transnistria, possesses a “B” license, which allows it to increase
these amounts to 35,000 MDL ($3,100) for an individual and 50,000 MDL ($4,400) for a
family. This SCA has almost 400 members, and disbursed 242 loans in 2008, with an
average loan of 11,000 MDL ($976).208 Interest payments are due on a quarterly basis,
with the principle due in the last quarter. Penalties for late payments are severe: the
member is labeled “at risk” for one year, and the interest rate jumps dramatically from 30
percent to 160 percent! For example, a 750 MDL quarterly interest payment on a 10,000
MDL annual loan becomes a payment of 1,333 MDL. However, Executive Director, Alina
Lungu, proudly shared that she has not had one late payment during her tenure.209
Figure 20 below outlines the fee structure between microfinance institutions, SCAs and
SCA members, using Microinvest as an example. Microinvest receives funding from its
lenders, such as the World Bank or EBRD. Microinvest then lends money to an SCA at an
annual interest rate of 24 percent, plus a 1.5 percent commission, charged before
dispersing the funds. For example, for a one million MDL loan request from a local SCA,
207 Interview with Victor Cauia, Executive Director, and Eugenia Frunze, Chief Accountant of the Slobozia
Dusca SCA. Date: March 18, 2009 in Slobozia Dusca, Moldova.
208 Interview with Alina Lungu, Executive Director; Nina Flore, Chief Accountant; and Nina Postica, Cashier
of the Dubasarii Vechi SCA. Date: March 18, 2009 in Dubasarii Vechi, Moldova.
209 Interview date: March 18, 2009 in Dubasarii Vechi, Moldova.
121
985,000 MDL would be provided. After one year, the SCA would have to repay the one
million MDL plus 240,000 MDL in interest. The SCA then respectively lends to its
members at 30-32 percent annual interest rate, thereby keeping a 6-8 percent profit
margin, which becomes part of their capital base and reserves. SCAs also charge a
commission of 3-4 percent. For example, 9,600 MDL is provided to an SCA member who
applied for a 10,000 MDL loan at 4 percent commission. If the interest rate is 30 percent,
the member must repay 13,000 MDL at year-end; of the 3,000 MDL, the SCA keeps its 6
percent profit of 600 MDL, and the remaining 2,400 MDL would be due to Microinvest.
Interest payments are pro-rated; therefore, the faster the member repays, the less interest
he or she must pay. According to interviews with four SCAs in the county (“raion”) of
Criuleni, the average hold of a loan by an SCA member is eight months, corresponding to
the agricultural season of March-October.210
Figure 20: Fee structure between MFIs and SCAs
Source: Compiled by author during field research in Moldova, March 2009.
210 Interview with Executive Directors and Chief Accountantss of SCAs in Molovata, Cosernita, Slobozia
Dusca and Dubasarii Vechi, all linked with the Criuleni branch of Microinvest. Date: March 25, 2009.
Appendix 5: Declaration of authorship 122
Appendix 5: Declaration of authorship
I hereby declare that I have sincerely endeavored to produce a paper of outstanding
quality;
I have produced this paper myself, without any outside assistance except from the people
and documents that I quote;
I have not copied and/or pasted this paper, or parts of it, from other papers or documents
available on the internet or elsewhere, except where I have explicitly stated so;
I have not submitted this paper or major parts of it to another seminar or class, either at
the University of St. Gallen or elsewhere, and I will not do so in the future.
Signed: _________________________________________
Alexandra Mihailescu, University of St. Gallen MBA Program, Class of 2009
Date: _________________________________________
Location: _________________________________________

Microinsurance Moldova

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Microinsurance Moldova

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Market Feasibility Study:

Microinsurance in the Republic of

Zurich Financial Services

Professor Dr. Steven Floyd

Finally, I cannot overlook the support of three extraordinary people in my life: my

Microinsurance is part of the broader concept of microfinance, which includes a variety of

However, most low-income persons do not currently consider insurance as a viable

Despite the passivity of firms in reaching out to lower-income people, a sentiment of

Microinsurance is a mostly unknown concept in Moldova. There is no specific

Finally, investment in financial education is necessary for the success of microinsurance.

3.4.2 Asigurare.md: the Online Insurance Portal ....................................... 30

5 Recommendations: Introducing microinsurance to Moldova ....................... 59

Figure 1: Risks and the cycle of vulnerability and poverty .................................. 2

Figure 2: The impacts of risks facing low-income people .................................... 3

Figure 3: Types and examples of insurances ........................................................... 4

Figure 4: The microinsurance supply chain ............................................................ 6

Figure 5: Insurance market premiums, 2002-2008................................................. 17

Figure 6: Organizational structure of the CNPF ................................................... 20

Figure 7: Market share of five top insurance firms, in 2008 ............................... 31

Figure 8: 2008 total premiums, top ten insurance firms ...................................... 32

Figure 9: Percentage of total insurance premiums by category ......................... 37

Figure 10: Distribution of SCAs among microfinance institutions .................. 66

Figure 11: Risks, uncertainties and responses....................................................... 98

Figure 12: Characteristics of an insurable risk ...................................................... 98

Figure 14: Selection from ABAR 2009 Charter .................................................... 100

Figure 15: Microinvest loan portfolio, 2004-2009* .............................................. 110

Figure 16: Microinvest number of active contracts, 2004-2009* ...................... 110

Figure 17: RFC portfolio composition, 2005-2008 .............................................. 113

Figure 18: Organizational structure of SCAs in Moldova ................................ 117

Figure 19: Overview of SCA licensing requirements ........................................ 118

Table 1: ZFS’s microinsurance markets, products and distribution channels.. 8

Table 2: Demographic overview of Moldovan population ................................ 11

Table 3: Macroeconomic overview of Moldova .................................................... 14

Table 4: Health statistics overview of Moldova ................................................... 15

Table 5: Top causes of death in Moldova .............................................................. 15

Table 6: 2008 key figures of the Moldovan insurance market ........................... 18

Table 7: Listing of compulsory insurances ............................................................ 23

Table 9: Overview of select insurance products in Moldova, 2008 ................... 38

Table 10: Overview of risks faced by low-income persons in Moldova.......... 47

Table 11: Reasons for lack of insurance in Moldova ........................................... 55

Table 12: Summary of risks and recommended insurance products ................ 59

Table 14: Overview of SCAs interviewed, March 2009 ....................................... 94

Table 15: Listing of insurance firms, March 2009 ................................................. 99

Table 16: Listing of insurance brokerages, March 2009 ...................................... 99

Table 17: Summary of 2008 SCA balance sheet .................................................. 119

Table 18: Overview of 2008 SCA loan portfolio ................................................. 119

List of Acronyms and Abbreviations

AAM Actuarial Association of Moldova

ABAR Association of Insurance Brokers

BNAA National Office of Automobile Insurers of Moldova

CBO Community-Based Organization

CEE Central and Eastern Europe

CNAM National Health Insurance Company

CNPF National Commission on Financial Markets

DIS Department of Insurance Supervision

EFSE European Fund for Southeast Europe

EBRD European Bank of Reconstruction and Development

IAA International Actuarial Association

IAIS International Association of Insurance Supervisors

IFAD International Fund for Agricultural Development

ILO International Labour Organization

IMF International Monetary Fund