Romania’s financial regulator withdraws license of insurer Euroins, asks for its bankruptcy
Romania's financial regulator ASF said on March 17 that its board decided to withdraw the operating license of Euroins Romania, part of Eurohold Bulgaria's Euroins Insurance Group, and file a request for starting bankruptcy proceedings. The board also decided to appoint the Insured Guarantee Fund (FGA) as interim administrator of the company.
In turn, Eurohold called ASF's decision irresponsible and abusive and said it considers it "a hostile takeover of the assets of the Romanian subsidiary." It also said it would challenge the decision for the bankruptcy proceedings.
ASF said in the press release that, following Friday's decision, "the responsibilities of the company's management are suspended." It also explained that the mandate of the FGA ends when the judicial liquidator is appointed.
"At 30.06.2022, the company did not have eligible funds for SCR coverage, a situation maintained at 30.09.2022. To restore the solvency capital requirement (SCR), funds in the amount of RON 2.19 billion are needed, and to cover the MCR, funds in the amount of RON 1.75 billion. The decision to withdraw the license was taken as the situation of Euroins Romania does not make it reliable to apply a resolution procedure," reads the ASF statement.
The financial regulator also said that, between February 2020 and January 2023, it sanctioned Euroins 26 times, imposing fines of over RON 16 million.
Euroins is a leader in the RCA insurance sector, with over 2.5 million policyholders.
ASF followed the same procedure in the case of City Insurance. In 2021, the authority withdrew City Insurance's operating authorization and declared its insolvency. Then, the Insured Guarantee Fund took over all the company's files, but the accumulated damages quickly led to the increase in the price of mandatory car insurance (RCA) policies, Biziday.ro explained.
Eurohold Bulgaria reacts to the ASF decision
In a quick reaction to ASF's decision, Eurohold Bulgaria said it considers it "a hostile takeover of the assets of the Romanian subsidiary." It also mentioned that the move would throw the RCA insurance market "into a real disaster," as it would most likely lead to a hike in the price of RCA policies.
"Eurohold's and EIG Re's management considers this measure abusive, absolutely irresponsible, especially in the current situation of the Romanian insurance market, and in contradiction with the good European practices," reads the company's press release.
"The decision of the ASF board ignores the reinsurance contract of Euroins Romania with EIG Re, the group's reinsurance unit, and does not consider the financial statement of the reinsurer talks itself. Furthermore, ASF's board has adopted a decision that does not consider the position of the Bulgarian financial regulator (FSC), the leading supervisory body in the case of EIG Re. This directly breaches the European legislation and could drive heavy consequences and measures on an international level."
Furthermore, Eurohold said that the decision of the ASF board "has provoked the activation of the Art. 26 in the reinsurance agreement signed by Euroins Romania and EIG Re, which provisions that in case of abusive actions and threats against the company from third parties, including abusive suspension or revocation of its license by the regulator, EIG Re has the right to withdraw from the contract with Euroins Romania and keep all written volume premium of the Romanian unit without any obligation towards the claims and risk related to the Romanian unit."
The company also said it has repeatedly warned of an "organized attack against Euroins Romania and attempts for a hostile takeover," and ASF's decision came to confirm this scenario.
The management of Eurohold will start the procedure to challenge the decision for the bankruptcy proceedings.
The government says it would protect the interests of the insured
The government also reacted to ASF's announcement on Friday, saying it would support all the necessary measures to protect the interests of the insured affected by developments on the RCA market, News.ro reported. It also noted that ASF would send the solution proposals to the Ministry of Finance for submission to the Government level.
(Photo source: Euroins Romania)