THE BIGGEST FAILURE in the Romanian insurance industry: ASF has decided to withdraw CITY Insurance's operating license and open bankruptcy proceedings

20 September 2021 — Daniela GHETU
The Board of the Financial Supervisory Authority has decided to reject the short-term financing plan and the recovery plan, to withdraw the operating license, to declare insolvency and to file for the opening of bankruptcy proceedings against CITY Insurance - the largest player in the local market, with a 20% share of the total industry and 45% in the MTPL segment.

Commenting on the decision to withdraw CITY Insurance S.A.'s operating license, Nicu MARCU - President of the Financial Supervisory Authority -, said:

"Since the first day of my mandate as President of the Authority, I have set myself the task to firmly enforcing the law and stopping irregularities in the insurance market and I assure you that my efforts will continue. All decisions are based on extensive expert investigations, factual evidence and the support of law enforcement institutions in Romania, but also in other countries."

UNSAR - the National Union of Insurance and Reinsurance Companies in Romania announced that it has taken note of the decision of the Council of the Financial Supervisory Authority - ASF on the withdrawal of the operating license of CITY Insurance and the opening of bankruptcy proceedings - insurance company that is not a member of the association.

"The impact of the situation is certainly significant, but the MTPL insurance market in Romania will continue to operate and will overcome this situation, and the holders of MTPL insurance policies issued by this company (CITY Insurance - n.r.) and the injured parties are protected by law through the protection mechanism built in this regard", UNSAR representatives said Friday evening.

"At the same time, we continue to support legislative initiatives that benefit consumers and ensure an optimal and sustainable operating framework in the medium and long term. Therefore, we welcome the launch of the public debate on the draft Emergency Ordinaire amending and supplementing Law No. 213/2015 on the Insurance Guarantee Fund - FGA, which amends the time limit within which the Fund is entitled to make payments from its assets to insurance creditors. This newly introduced provision is an additional measure to protect this legally protected category from the consequences of an insurer's insolvency", they added.

The Romanian Motor Insurers' Bureau - BAAR announced that it has been informed of the withdrawal of CITY Insurance's operating license by the Financial Supervisory Authority, following the rejection of the recovery plan drawn up by the insurer.

BAAR considers that, given that the insurer no longer met the solvency indicators, i.e. the minimum capital, and was in default, the withdrawal of its authorization by the Insurance Supervisory Authority is in line with the legislation and the general rules of governance in the sector.

"We are convinced that all policyholders with insurance policies taken out with CITY Insurance will benefit, when appropriate, from compensation through the Insurance Guarantee Fund. BAAR would also like to reassure once again that in this situation too will act only in accordance with the law, but also with the highest standards of professionalism and efficiency, without bureaucratic barriers to fulfil its role externally. We express our hope that the local insurance industry has reached a maturity, an experience and a level of regulation that allows it to overcome the effects of any dysfunction that may arise at a given time and, together with the commitment shown by the state authorities at this time, and I refer here to the two Emergency Ordinances announced by the Prime Minister, we are certain that we can manage this moment in an optimal way", said Madalin ROSU - President of BAAR.

The Natural Disaster Insurance Pool (PAID) clarifies the bankruptcy of a distributor of mandatory natural disaster policies (PAD), namely CITY Insurance, which does not affect the validity if the insurance nor the processing of claims submitted by beneficiaries.

CITY Insurance is a founding member and shareholder of the Natural Disaster Insurance Pool - PAID Romania.

"Mandatory insurance against natural disasters is a policy managed by PAID and is only distributed by other entities. For this reason, PAD remains valid until the expiry date, regardless of what happens to the policy distributor. PAID is stable in terms of solvency ratios, has its own funds and has the largest reinsurance programme in Central and Eastern Europe, amounting to 1 billion euros", explained PAID's General Manager, Nicoleta RADU.

Cristian Suca

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