The initiated bankruptcy of Euroins is the latest in a series of collapses of some of Romania’s largest insurance companies over the past 8 years. For Romanians, this meant an explosion in RCA prices.

After 2 years of control and fines ranging from 34,000 lei to more than 3.5 million lei imposed by the Financial Supervisory Authority (ASF), the institution that was supposed to monitor compliance with the law, Romanians will feel the consequences of a new major bankruptcy of Euroins – the largest RCA leader with almost 2 .8 million customers.

ASF defends itself by claiming that between February 2020 and January 2023, it imposed a total fine of more than 16 million lei on this insurer.

Euroins, on the other hand, accuses ASF of a hostile takeover and says it will pursue all legal means in Romania and other jurisdictions to challenge ASF’s decision.

Euroins will be RCA’s fourth major bankruptcy in the past 8 years in the insurance sector under “close supervision” by the Financial Conduct Authority (ASF), following Astra, Carpatica and City Insurance.

If Euroins is behind the Bulgarian group Eurohold, the other three companies that went bankrupt were controlled by Romanian businessmen with political connections, they left behind tens of thousands of people who managed to recover only part of the compensation demanded.

Each time, the remaining insurers had to pay even more to the Insurance Guaranty Fund (FGA), which takes over the bankrupt company each time, and to take over the insurance of the bankrupt companies’ customers, all of which caused prices to explode.

• read: RCA price explosion after City Insurance bankruptcy: case studies plus market growth Insurance brokers See

Below we present a timeline of RCA’s major bankruptcies and the amount of compensation FGA has paid out to date in each of these cases

Dana Adamescu’s Astra: payments over 557.3 million lei after revocation of authorization in 2015

RCA’s first major high-profile bankruptcy was that of Astra Asigurări, a company controlled by former businessman Dan Adamescu, who died in January 2017.

On Thursday, April 28, 2016, the final decision on the bankruptcy of Astra Asigurari was made.

The latest information sent to the FGA upon request by HotNews.ro shows that “until March 10, 2023, the Fund made payments in the amount of 557.3 million lei to Astra Asigurări.”

Carpathia Iliye Karabula: Payments of more than 501.9 million lei after revocation of authorization in 2016

The second high-profile insurance bankruptcy was the bankruptcy of Carpatica Asigurări, a company controlled by businessman Ilie Karabulea.

In the summer of 2017, he was sentenced to five years and six months in prison in the Karpatyka case, and was released on parole in 2018.

On July 27, 2016, the ASF management decided to withdraw the license for Carpatica’s activities.

The final decision on the bankruptcy of Carpatica Asigurări was made in court on March 24, 2017.

FGA data sent to HotNews.ro show that “until March 10, 2023, the Fund made payments in the amount of 501.9 million lei to Carpatica Asigurări.”

City Insurance Dana Odobescu, Adrian Nestace’s son-in-law: payouts so far exceed €150 million

RCA’s latest bankruptcy is City Insurance, the former RCA leader controlled by Dan Odobescu, son-in-law of Adrian Nestase, which filed for bankruptcy in 2021.

The final bankruptcy decision was made in court on April 20, 2022. The deadline for submitting payment claims to the FGA is July 20, 2022.

FGA data sent to HotNews.ro show that “until March 10, 2023, the Fund paid out 739.9 million lei (over 150 million euros) to the City Insurance company.”

Euroins: ASF has decided to withdraw the license to operate and demand the bankruptcy of the leader of the RCA

ASF was officially announced on Friday that he has decided to withdraw the authorization to carry out activities and file a bankruptcy case against Euroins, and the management of the company will be taken over by the Fund for the Guarantee of Insurers (FGA).

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.

Why RCA prices rise after bankruptcy: Insurers forced to pay FGA more

In order to manage the bankruptcy of City Insurance, as well as the other major bankruptcies of Astra and Carpatica, the Financial Supervisory Authority (ASF) decided to increase the fees that insurance companies pay to the FGA for managing insurance bankruptcies.

• “The year 2022 was marked by an increase in the general insurance contribution rate collected by the FGA from insurance companies from 1% to 2.5%, resulting in the collection of an average monthly contribution of 24.8 million lei.
• The current year brought a new increase in the premium rate for general insurance from 2.5% to 4%, which leads to an average monthly increase in revenue to a projected level of 46 million lei.” The Insurance Guarantee Fund (FGA) announced in January this year.

These successive increases in the premiums that insurers pay to the FGA, as well as the fact that other insurance companies in the market have to take on the customers of a failed insurer with all the associated risks, have caused RCA prices to explode.

According to data sent to HotNews.ro by the Insurers’ Guarantee Fund (FGA), “On March 10, 2023, the financial availability of the FGA was 180.3 million lei.

According to the law, FGA can meet its liquidity needs through the following resources:

• policyholders’ contributions to the Fund;
• penalties and penalties for late payment of premiums by policyholders;
• sums from the fruiting of Fund funds;
• sums from the collection of claims of the Fund;
• amounts received from legal interest related to loans granted to the Rehabilitation Fund for insurers administered by the Fund;
• amounts from other sources established in accordance with the law;
• loans from credit institutions or mandatory loans by issuing securities of the Fund;
• interest or taxes in connection with any loans or guarantees provided to the insurer, in accordance with the resolution, in accordance with the provisions of Art. 59 liters b) from Law No. 246/2015.

“In order to fulfill its obligations to insurance creditors, the FGA will apply the provisions of Law No. 213/2015, carrying out a periodic analysis of the evolution of registered payment requests and the relevant provisions, as well as on the basis of constantly updated data and information. , estimates on the evolution of contribution revenues, as well as legislative changes, the FGA will propose changes to replenish existing funds, if the situation requires it,” the FGA said.

What measures is the Chuke government taking on RCA prices

The Insurance Guaranty Fund (FGA) does not have enough resources to deal with the situation at Euroins, given that it is already paying for the bankruptcies of Astra, Karpatyka and City Insurance.

If the court decides to declare Euroins bankrupt, the RCA policies will automatically terminate after 3 months, but in the meantime they may incur losses.

Where does the money come from? HotNews.ro sources say that in order to resolve the situation, the government will lend FGA and limit RCA prices, a measure already taken into account by the ASF, which is being seriously worked on, according to some government sources.

The problem is that capping RCA prices would mean many drivers would pay more than they do now, and such a measure could trigger a crackdown by the European Commission, as has happened in the past.

RCA price caps may actually mean higher prices for some drivers

The RCA price cap imposed by the ASF in the scandal caused by the new reference rate increase could be expensive for many drivers, especially those from cities other than Bucharest, for which there are insurers selling RCA below the non-mandatory reference rates mandatory, but only indicative.

RCA’s price cap would not be the first in Romania. A similar measure was adopted in 2016 by the Cholos government for a period of 6 months. Insurers sued the government, and Romania launched an infringement case with the European Commission.

• Will RCA’s new maximum price be beneficial or not for insurers?

HotNews.ro analyzed the final RCA prices compared to the new reference rates announced by the ASF to see how it might affect policyholders.

Given that the indicative rates announced by the ASF are valid for drivers belonging to the B0 class, HotNews.ro asked insurance brokers to provide some simulations of RCA offers for this category.

This is evidenced by the data in Bucharest, final RCA prices are higher than reference prices both for individuals and legal entities of class B0.

RCA final prices may be lower in other cities but even higher than the base rate, given that insurers also take into account their own indicators when setting these prices.

In Bucharest, RCA prices are usually higher than in other areas, given that many of the damages are caused by car owners living in the capital.

As you know, Euroins has already reduced its exposure to RCA since last year and is especially running away from Bucharest drivers in order not to accumulate further losses, which is why it was charging the highest prices for RCA in the capital until the ASF’s decision on Friday, March 17, which revoked activity permit.

• Read more: RCA price caps could actually mean higher prices for some drivers / What are the current prices in Bucharest compared to other cities