Owner of largest Romanian insurer: Regulator's decision to enforce special administration, 'shocking and irresponsible', we will appeal it in court

Dan Adamescu, the owner of the largest Romanian insurance firm Astra Asigurari, which was recently placed under special administration by the country's financial regulator, will appeal the decision in court. He said the decision was 'shocking and irresponsible”, and that the financial authority did not respect its own norms when placing the insurer under special administration. Adamescu reminded of a series of steps that had to be made in this case, among which asking the shareholders to increase their social capital, which was one of the problems for which it was placed under special administration. “But the authority skipped this step. We are shocker by this decision which is incredible, nowhere else in the world the regulator makes a decision without complying with the legal requirements.” He went on: “The regulator had to act in a decent and discrete way, because this is how the market works, but they dropped the bomb. They don't even realize the impact of this decision. How big the damage is, nobody knows and it can't even be calculated.” He reminded of the 2.6 million people insured with Astra, and that if clients and partners stop trusting the firm, it will die. Adamescu also said that this 'terror' started last year in fall, when Astra agreed to buy Axa in Romania, when being chosen as buyer from a group of other large international companies was a great boost in image. However, back then, when after the takeover the social capital increased by EUR 35 million, the surveillance authority ASF did not greenlight the takeover. “This takeover would have solved all of Astra's problems, but it was not wanted,” Adamescu explained. Furthermore, he added the insurance firm submitted a plan of measures in December 2013, which also included a social capital raise, but it was not even discussed within ASF. Astra was recently placed under special administration by the country’s Financial Surveillance Authority ASF and will be managed by consultancy firm KPMG. ASF decided to suspend the shareholders and the management of Astra, in order to help the firm recover financially, according to the authority’s release. The special administrator KPMG will take over all the management and shareholders’ attributions. The new administrator will have to start procedures to increase the social capital so as to comply with the national regulations. Two weeks ago, ASF was suspecting Astra Asigurari of having purposely undervalued the damages it was supposed to pay, so its reserves were 40 percent below the required level, according to Mediafax newswire. Following this recent decision, all of Astra Asigurari’s insurance contracts and cases, including those where damages need to be paid, will be re-evaluated. During this period, Astra Asigurari will not be able to make stock or real estate investments, except invest in bank deposits and state titles, and it will not be allowed to sell assets without ASF’s approval. Astra Asigurari recently agreed to take over Axa insurance firm in Romania, but the deal is not yet finalized. Astra Asigurari reported revenues of some EUR 133 million from premiums in the first half of 2013, up 16 percent on the same period of 2012. The company, which has been active since 1991, is controlled by The Nova Group Investments România – 72 percent of the shares, and Epsilon Estate Provider SRL- 27 percent, plus a group of individuals and companies who control the rest. Both companies are owned by businessman Dan Adamescu, who also owns the Intercontinental Hotel in Bucharest.