Scandal in the insurance sector

The government is working on 2 emergency orders on the insurance market

Corina Cristea, 21.09.2021, 13:50

City Insurance, Romania’s leading issuer of civil liability insurance for
car owners, went under the special administration of the Insurance Guarantee
Fund in early June, and has failed to submit in due time the amount stipulated
in the relevant minimum capital requirements. ASF has announced that without this amount, of over 150 million
euro, the company, which has issued some 3 million car insurance policies, can no longer
continue to operate in Romania. Dan Apostol, spokesman for the Financial Supervising Authority:

Dan Apostol: The authority ordered the
company to submit, by the deadline stipulated by law, a short-term financing
plan-in other words, to prove it has the money to cover the minimum capital
requirement. Then they were supposed to come up with a recovery plan to prove
they meet the solvency capital requirement. Also, to ensure a prudential
management of this company, the Financial Supervising Authority appointed the
Insurance Guarantee Fund as a temporary administrator.

The
investigation into the company’s bankruptcy points to possible frauds and
operations conducted in tax haven countries, says the head of the Insurance
Division of the Financial Supervising Authority. According to Valentin Ionescu, City Insurance
declared fictitious amounts in its accounts, and the reinsurance was conducted
via offshore accounts difficult to verify:

Valentin Ionescu: This company placed
outwards reinsurance on 90% of its contracts, going to tax havens. We
investigated with the authority in the Cayman and Barbados, the answers took a
year to reach us, and we found there are also problems with respect to the
insurance of this company.

The Financial Supervising Authority cancelled City Insurance’s license,
declared the company insolvent and initiated the bankruptcy procedure.

At
present, there are tens of thousands of cases involving damaged cars with City
Insurance policies, and the claims will be taken over by the Insurance
Guarantee Fund, which will cover the damages.

Meanwhile,the government is
working on 2 emergency orders on the insurance sector, which are currently
pending approval by the Competition Council, PM Florin Cîţu announced. One of
the orders concerns policy prices, and the other one provides for some form of
protection for the clients of City Insurance, if necessary. The latter is aimed
at stepping up the payment of claims for policy owners.

Under the current legislation, car owners have to wait
months and even years for the court to rule the company bankrupt, as it was the
case with 2 other companies, Carpatica and Astra, which left the insurance
market several years ago. (tr. A.M.
Popescu)