The Lithuanian Cabinet approved on February 12th, a loan of EUR 2.9 million for the state-owned housing mortgage insurance company, BUSTO PASKOLU Draudimas. The loan is necessary for helping the insurer to fulfill its obligations and continue to pay claims, informs LETA/ELTA.

UAB BUSTO PASKOLU Draudimas provides housing mortgage insurance for housing procurement, construction, reconstruction, refurbishment or procurement of land plots, housing construction, and modernization of multi-apartment houses in Lithuania. Its insurance products/services include state support for housing procurement and modernization of multi-apartment houses, and the insurance of residential property credit and credit for modernization of multi-apartment houses. The company was incorporated in 1998 and is based in Vilnius, Lithuania.

However, due to the decline in bank lending and to the increased unemployment brought by the crisis, credit insurance contracts declined rapidly in 2012 - 2013, strongly affecting the company's activity. In fact, no housing credit and consequently no housing credit insurance contract were concluded in 2013. Given the situation the company's task were reconsidered to a prevailing loss adjuster activity, but its cash flow proved inadequate in order to fulfill the payment obligations. Moreover, the increasing default rate of the active credit contracts due to impoverished population put an addition strain on the company's balance and led to ever growing financial losses.

As a result, in November 2013, the Bank of Lithuania suspended the company's insurance license, forbidding thus the conclusion of new insurance contracts, but leaving the company with the obligation of further servicing the about 35 thousand exiting contracts.