Regulatory update for Romania and the Role of Insurance in the Gambling Industry

The Romanian gambling industry has experienced remarkable growth over the past decade. This expansion has been accompanied by numerous legislative changes which reformed and updated the legal framework, but also increased by several times the tax burden and financial obligations incumbent upon operators.

New legislative packages were adopted at the end of 2023 and the beginning of 2024, severely amending the Romanian gambling law. To better understand the full impact of these changes, we will examine the most notable ones with a special emphasis on a new provision that, it is fair to say, created quite a shock in the market: the increase in the guarantee requirements applicable to gambling operators.

As a brief recap, the legislation has always imposed the obligation for all gambling operators to set-up a guarantee meant to cover the risk of non-payment of their tax duties. Originally, the amount of the guarantee varied depending on the type of license held. In the case of online operators offering both casino and betting products (this combination of verticals being the most popular in Romania), the guarantee was set at the level of €200,000. Most operators would probably accept that this is a reasonable requirement for a regulated market like Romania that has shown consistent growth over the years.

However, a major dilemma was created in October 2023 when the Romanian Government passed an ordinance dramatically increasing the sums required as guarantees. The result in 2024 is that the level of guarantee may reach several million euros (depending on the operator’s revenue). And, from the start of January 2025, any operator licensed to offer both casino and betting products must have in place a guarantee against non-payment of its tax duties totalling €7,000,000 (yes, we double checked the zeros, that’s seven million euros, 35 times higher than the previous requirement).

Romanian lawmakers did not only increase the guarantee amount, but also introduced a new method to comply with this requirement. Prior to October 2023, the law allowed two alternatives for fulfilling the guarantee obligation: either by depositing the necessary amount into a special treasury account opened with the Romanian authorities, or by procuring a bank guarantee letter. A third, new alternative is for operators to secure an insurance policy issued by a duly licensed insurance provider from EU/EEA/Switzerland.

Leaving €7,000,000 on permanent deposit is a significant financial burden in the context of Romanian operations, so the innovative aspect of this recent legislation, the introduction of an insurance policy option is definitely worth analyzing in more detail.

Characteristics of Insurance policies for gambling operators in a taxation context

The insurance policy designed to cover a tax-related risk has several unique characteristics that differentiate it from standard insurance products. Understanding these features is crucial for both operators and insurers:

Nature of the Risk Insured

The insurance policy covers a very specific risk associated with the gambling industry: that an operator is unable to meet its tax obligations towards the Romanian State Budget. This nature of the risk is unusual because certain gambling taxes must be paid by a licensed operator in advance (meaning there is no risk to be insured), while the recurrent GGR tax has to be calculated and paid based on the revenues already obtained by the operator (so the risk of non-payment should not, in theory, be material since, by design, the operator should have sufficient liquidity). In other words, since the taxation system has been created to protect its creditor (the Romanian State), the risk covered by the insurance policy should theoretically occur only in limited scenarios which entail either gross negligence by the operator or the deliberate intention not to pay the taxes due.

Premium Calculation

The premium for such an insurance policy would normally be determined based on several factors, including the operator’s financial health, the scale of its operations in Romania, historical compliance with the tax regulations, and overall risk profile. It is important to note that the insurance is designed strictly to cover tax liabilities, not the overall compliance of the operator with gambling legislation.

By this logic, the scale of operations might be the most important factor for calculating the premium. An operator with a limited market share could have an aggregate tax liability during a one-year period significantly below €7,000,000 (and this would naturally justify a lower premium). On the other hand, by looking at the publicly available data, the operators with the largest market share in Romania have a tax liability of several million euros every month. In these cases the risk profile is naturally higher as the activation of any insurance policy by the Romanian authorities would be for a significantly greater liability.

It is clear that insurance policies designed to protect the Romanian State from non-payment of taxes by the gambling industry cannot be “one-size-fits-all”. The reality is a very complex financial product which must be thoroughly tailored to every individual case.

Policy Conditions

Any insurance policy will most likely include specific conditions that operators must meet to maintain coverage. These conditions could involve regular financial reporting, compliance audits, and strict adherence to the legal deadlines for payment of the tax duties. Furthermore, since in most cases the sum insured by the policy will be the amount of €7,000,000, it is likely that the insurer will request some form of collateral from the operator.

Failure to meet these conditions could technically result in increased premiums or policy cancellation.

Claims Process

By comparison to other “standard” insurance products where the insurer might need to conduct an investigation to verify the legitimacy of the claim, an insurance meant to cover the risk of non-payment of the tax duties will have a more straightforward claim process. Thus, the mere fact that an operator has failed to pay one of the taxes due by the applicable legal deadline technically means that the risk has materialized, and the state authorities can mount a claim against the insurance policy.

Benefits for the Industry

The introduction of an insurance option to the Romanian gambling legislation benefits the industry by providing a flexible and financially viable way to meet regulatory requirements. Furthermore, this new alternative introduced in the law also brings an additional layer of oversight, as insurers will conduct their own assessments and audits of operators.

However, the key factor determining the viability of an insurance product tailored for the gambling industry will remain the level of and calculation method for the premium that will need to be paid by the operators.

While this new insurance option has been a legal possibility for more than six months and certain insurance companies in the Romanian market have already declared that they are working on launching a product for the gambling industry, it seems that we are still in the early stages. It remains to be seen whether licensed operators in Romania will be able to rely in future on insurance as a viable way of meeting the guarantee requirement imposed by law.

The full picture: regulatory update – Romania

The significant increase in the guarantee amount related to tax duties does not represent the only recent change to the regulatory framework in Romania and in fact the end of 2023 and beginning of 2024 brought numerous other legislative amendments which impact the local industry. Among these changes, the following are worth noting:

– A gambling license can be obtained by an EU/EEA legal entity only in case a permanent establishment has been registered in Romanian for tax purposes. This amendment has been introduced via a Government Ordinance which entered into force on 6 October 2023, and which provided for a grace period of six months for online operators which have already obtained a license to comply with the new permanent establishment requirement. This new obligation naturally increases the tax burden applicable on operators since, besides the gambling specific taxes, corporate tax related to the Romanian operations must also be paid at the level of a permanent establishment;

– While for B2C operators the tax guarantee requirements have been increased, for certain B2B suppliers these requirements have been repealed. More specifically, prior to 6 October 2023 testing laboratories which applied for a B2B license as a certifier or auditor needed to secure a guarantee in the amount of €250,000. This obligation no longer exists in the law so from this particular perspective the Romanian market became more attractive for testing laboratories servicing the gambling industry;

– Starting at end of April 2024, a joint-venture operation can be established only in case the partners of the B2C licensed operators hold their own B2B license and only in case such partners are “affiliated with” the operator (the new legislation does not however detail how the affiliation requirement should be construed). This new requirement creates an extra level of complexity (especially for the land-based market which heavily relies on joint-ventures) since the common business model used in the past in Romania was that the licensed B2C operators entered into joint-ventures with various third parties that did not have their own licenses;

– Starting at end of April 2024, all B2B suppliers that hold a license in Romania must implement technical measures to prevent unlicensed gambling platforms being accessed from Romanian territory or by Romanian players. The new legislation does not detail the technical measures that need to be put into place by B2B licensees and technically the regulator should issue an order clarifying this new regime;

– Land-based slot-machines have been restricted from all localities with less than 15,000 inhabitants as part of a legislative change that entered into force in April 2024. This new restriction created significant turmoil in the land-based sector where numerous operators were forced to shut down their operations or create an entirely new business model. In order to limit the impact created by this new restriction, certain legislative proposals currently being debated in Parliament are meant to reduce the tax burden on the land-based operators affected by the restriction.

The gambling industry is familiar with regular legislative and rule changes and the new pieces of regulation in Romania are part of a trend which may be interpreted in multiple manners. On the one hand, increased regulation inherently shows that the industry is growing as a whole and that operators are managing to broaden the appeal of their products to attract new categories of consumers. On the other hand, the increase in gambling taxes (which may be noted throughout Europe) can be seen to have a stifling effect on the industry since start-up operators might face significant barriers to entry while the traditional titans in the industry are able consolidate their positions even further.