1. Biggest bankruptcy – Astra Asigurari
Astra Asigurari, the third largest insurer by gross written premiums in midyear, in August went bankrupt and was to be dissolved after spending a year and half in receivership supervised by KPMG. Its license was withdrawn, following the failure of the 425 million lei (almost EUR100 milion) capital increase, which ended a 25-year history and led to the worst bankruptcy in the local insurance industry.
The poor management of the company, the use of the assets to further personal or group interests, as well as inaccurate reporting of the financial performance and prudential indicators were the main causes the Financial Supervisory Authority (ASF) identified for the collapse of Astra. When it had its license revoked, the insurer had 1.8 million customers, about 1,400 employees, RON500 million assets and RON440 million revenue. Most of its portfolio was auto liability insurance (RCA), which made up about 40% of the outstanding policies or 881,000 contracts.
2. First market assessment report
The stress test report ASF presented in early June indicated a RON1.6 billion capital deficit and stirred harsh reactions from insurers, which said the assessment does not reflect the up-to-date figures and is not relevant because it used June 2014 financial data, while some insurers took the necessary steps to address the problems in the meantime.
The stress test conducted by the ASF, the European Commission and the International Monetary Fund started from the financial statements drawn up by auditors on June 30, 2014.
3. Market consolidation through Ergo-Credit Europe deal
Germany’s Ergo, part of the Munich Re reinsurer, decided to expand its operations on the general insurance market in Romania and took over Credit Europe’s local subsidiary, which posted RON42 million revenue last year. This is a good thing and helps boost confidence and competition in the local insurance sector. Ergo owns a life insurer with 100,000 clients in Romania and wants to tap into the auto liability insurance segment in one to three years.
4. Up to 300%-400% auto liability insurance price rises and street protests
The end of December saw transporters take to the streets to protest against the rise in the price of auto liability insurance by as much as 300% to 400%, accusing ASF of sitting idly by. While carriers protest and say the services provided do not justify the prices, insurance companies say the claims rate is extremely high. As a result, the ASF started an investigation into the auto liability insurance market and unannounced inspections at the nine companies selling such policies.
5. Financial recovery of the largest auto liability insurance company, Euroins
Following the Astra bankruptcy and the start of the financial recovery procedure at Carpatica Asig, ASF on October 15 decided to do the same with Euroins, the largest auto liability insurance company, with an about 20% market share. The decision to start the financial recovery procedure at Euroins was based on a report on the activity and financial management of the company, which revealed a number of problems with the solvency and capital level. The authority instructed the shareholder of the company, Bulgaria’s Eurohold group, to come up with RON200 million, revise the reinsurance strategy and replace the external auditor.
6. Rebranding of the largest life insurer – ING Asigurari becomes NN
ING Asigurari de Viata, which accounts for almost one third of the life insurance market in Romania, changed its name to NN Asigurari de Viata in April. The rebranding cost some EUR10 million. The NN brand, used for the insurance, pension and investment management divisions in Europe, was chosen based on a regional research that included feedback from 20,000 individual customers and companies.
7. New management for Asirom and Carpatica Asig
Two insurance companies out of ten, Asirom and Carpatica, have new bosses as of this year.
Slovak Juraj Lelkes, 64, was approved by the ASF for the position of chairman of the board of Asirom, an insurer that posted RON575 million revenue last year and is owned by the VIG group. Carpatica Asig got a new general manager in August, Liviu Stoicescu, who had previously held management positions at Astra and Omniasig.
8. Deals on the brokerage market: SRBA and Otto Broker
The insurance brokerage market attracted investor interest and two entrepreneurs in this business sold stake in their companies. SRBA, a broker founded by Gheorghe Grad, which posted RON58 million revenue in 2014, sold 51% to Renomia, a Czech Republic brokerage company, while Otto Broker, established by Victor Sraer, struck a deal with investment partnership The Foundations 1.0 SEE. Otto Broker will receive a EUR4 million capital inflow in four instalments, which will go towards its development. Victor Sraer kept 50% in Otto Broker.
9. Over EUR60 million capital increases
The shareholders of insurance companies continued to invest in their local subsidiaries so they operated EUR63 million capital increases in the first nine months of the year. The capital increases were mostly used to offset losses, since the market has been in the red for ten years. Insurers also had to increase their capital to meet stricter solvency and capital requirements.
10. New rules for companies going bankrupt
ASF will be able to intervene in case of an insurer in trouble or about to get in trouble, using the resolution mechanism promulgated this year. Therefore, the authority will be able to take over the management of the ailing insurer, separate the assets and even sell them.
(English version by Loredana Fratila-Cristescu)