Euroins Romania CEO Tania Blatnik announced on Friday that she will pursue all legal means in Romania and other jurisdictions to challenge the decision of the ASF, a body she accuses of ignoring two ongoing independent audits by the EBRD and the European Regulatory Authority EIOPA, which will end at the end of this month.

A message sent by Tania Blatnik, CEO of Euroins Romania:

• “Euroins Romania is surprised by the decision of the Financial Supervision Authority, which affects millions of Romanians.
• The fact that the ASF is ignoring two ongoing independent audits by the EBRD and the European regulator EIOPA is surprising.
• These inspections will be completed at the end of March, but the ASF decided to ignore them, although it was informed in detail.
• We are currently identifying all legal remedies in Romania and other jurisdictions to challenge this decision and, implicitly, to protect the financial interests of our clients and ensure the financial stability of the market. The Financial Supervision Authority did not even officially react to our report, in which we reported all violations of Romanian and European law committed by its audit team in a report published on February 2.
• The regulator, without taking into account any good practice established in the European Union, decided to communicate on Thursday evening, passing on information to the media, before any official communication, instead of establishing a serious professional discussion with the management of Euroins and its international shareholders .
• We are currently taking all necessary legal measures to protect the jobs of our 570 employees, excellent relations with our partners, the interests of our customers, as well as the investments of our shareholders and, ultimately, the stability of the financial market,” said the head of Euroins.Romania.

ASF decided on Thursday to ask for bankruptcy of Euroins through the court / Eurohold group accuses of unfriendly takeover

The ASF officially announced on Friday that it has decided to withdraw its authorization to operate and file a bankruptcy case against Euroins, with the Insurance Guarantee Fund (FGA) taking over the management of the company. The insurer will need funds in the amount of 2.19 billion lei for the solvency capital requirement, the authority reports.

Bulgarian group Eurohold reacted by accusing a hostile takeover of Euroins assets. According to HotNews.ro, Euroins Romania had 2.76 million active RCA policies at the end of January 2023.

In a separate analysis by the ASF, the body claims that from 2022 to February 2023, 8 serious violations were found at Euroins.

On 26.10.2022 and 02.02.2023, the ASF provided the company with two control reports, in which it is stated that the estimates in the rehabilitation plan are unrealistic and that there are discrepancies between Euroins reporting and the real situation.

Insufficient funds, deficit of hundreds of millions of reserves, unrealistic estimates

1. Euroins Romania overstated revenues and understated costs under reinsurance contracts. According to ASF’s analysis, the company overestimated revenues from 2021 by 151.5 million lei and underestimated expenses by 223 million lei. On June 30, 2022, revenues were overstated by 127 million lei, and expenses were understated by 91 million lei. In the case of an unapproved loss reserve (IBNR) reinsurance contract with EIG Re, part of the Euroins Insurance Group, the company could not prove that settlements had been made between the parties.

2. On 30/09/2022, Euroins Romania did not assess a sufficient loss reserve to cover all future cash flows, as required by European and local law.

3. Euroins Romania did not use the best actuarial practices for the calculation of the reserve for unapproved claims (IBNR), as required by the legislation in this field and the EIOPA rules.

4. Euroins Romania did not apply its own reserve calculation procedures, the reserve deficit was 605 million lei.

5. It did not make an estimate of the reinsurance recoverables associated with the accident year claims reserve, and an estimate of the reinsurance denial rate was not made based on claims experience.

6. Incorrectly calculated the amounts to be reimbursed from reinsurers or investment mechanisms.

7. Estimates in the recovery plan were unrealistic and did not cover the ongoing maintenance of own funds necessary to cover Solvency Capital Requirements (SCR). As of September 30, 2022, Euroins Romania did not hold these funds. As of 06/30/2022, the funds needed for the restoration of the EUS amounted to 1.6 billion lei, and as of 09/30/2022 they amounted to 2.19 billion lei.

8. It does not meet the conditions regarding the relevant basic own funds to cover the minimum capital requirements (MCR), thus violating the provisions of article 95, paragraph 1 of the law 237/2015. As of 06/30/2022, the funds needed to restore the MKR amounted to 1.25 billion lei, and as of 09/30/2022, 1.75 billion lei.

Reinsurance contract with EIG Re, the reinsurer in the group

In February 2023, ASF learned from a Euroins Insurance Group press release that Euroins Romania had recently entered into a reinsurance agreement with EIG Re, a group company. ASF immediately requested Euroins Romania to provide documents and clarifications regarding this contract, given that the company had not been notified earlier.

The company provided ASF with part of the requested documents. The first problem identified in the case of this contract is the presence of provisions that create advantages for the reinsurer at the expense of consumers in the relationship with Euroins.

In particular, one of the clauses states that if one party falls under any form of bankruptcy administration by the regulatory body, the obligations of the other party are terminated. In addition, if the business of trading in any class of insurance is suspended, the reinsurer shall be deemed free from liability and all premiums shall remain with him.

Through the above-mentioned reinsurance contract, Euroins Romania transfers 97% of the losses incurred until 31.12.2022 and 87% of the losses that should have been recorded in 2023. Euroins owed 1.58 billion lei to cover losses, of which 855 million lei were liquid and 732 million lei were recoverable amounts from reinsurance.

Euroins Romania reported that it has already transferred the rights to the assets. At the same time, Euroins Insurance Group said that assets worth 350 million lei will be transferred directly to Euroins Romania, while another 250 million lei will be made available as cash in lei.

The reinsurance contract provides that if the payments made during the settlement period exceed the receipts, the reinsurer will undertake to pay the difference to the reinsurer, in this case Euroins Romania. Otherwise, the difference between receipts and payments will remain with the reinsurer. Analysis of the contract showed that it does not lead to the restoration of the company’s solvency.

The ASF Board decided to instruct the FGA, as interim administrator, to take all measures to terminate the contract with EIG Re.

To answer, in a message sent to the editors, Euroins notes: “The ASF Romania report covers the situation as of June 30, 2022, with an extension to September 30, 2022. As for 2023, the ASF refers only to the refusal to accept reinsurance, without any reference to the EBRD’s shareholding and capital subscription, actions approved by the ASF and later but not taken into account for solvency. That is, it contradicts itself”.

• Read more: History of fines received by Euroins / Why ASF refused to reinsurance EIG Re / Reaction of Euroins