In February 2020, the FSA found several breaches at Euroins, including failure to meet compensation payment deadlines and not having proper procedures for handling claims or under-provisioning. On Friday, the ASF announced the withdrawal of Euroins’ authorization and the filing of bankruptcy proceedings

Euroins was then fined and ordered to improve its IT system to review all outstanding claims by the end of 2020.

• In September 2020, after two inspections, one unannounced and one permanent, the FSA found deviations in the establishment of the claims reserve and the premium reserve, as well as the lack of adequate own funds to cover the minimum capital and solvency requirements. capital. The company was fined and a new action plan imposed.

• In December 2021, after a periodic inspection, the FSA found several deviations: the failure to create National Regime and Solvency II reserves, inappropriate claims file records, non-compliance with legal provisions regarding compensation instruments and deadlines, lack of sufficient own funds

• March 2022. Continued delays in the calculation of damages, as well as non-payment of penalties, were noted. The firm is required to review its recovery plan so that it is capitalized, increase its share of gross written premiums (GPR) from non-RCA insurance, and overhaul its claims management procedures. Euroins presents ASF with a recovery plan and commits to recover the necessary funds to cover the SCR by June 30, 2022. Euroins also undertakes to increase its own funds through two subordinated loans for a total of 100 million lei.

• In July 2022, the company is again subject to sanctions for failure to submit financial statements by the deadline set by law. On August 2, 2022, four months after the statutory deadline, Euroins submitted audited financial statements. The auditor’s opinion is conditionally that he did not receive “sufficient and appropriate audit evidence”

• November 2022. There are other violations of Euroins Romania regarding the improper creation of technical reserves under the national regime, as well as incomplete, incorrect and improper reporting of the status of legal proceedings in the lists of Romanian courts in which the company was a defendant.

From 2022 to February, 8 serious violations were discovered at Euroins. On 10/26/2022 and 02/02/2023, ASF provided the company with two control reports stating that the assessments in the rehabilitation plan were unrealistic and that there were discrepancies between Euroins’ reporting and the actual 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 09/30/2022, Euroins Romania did not assess a sufficient loss reserve to cover all future cash flows, as required by European and local legislation.

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.

According to the mentioned reinsurance contract, Euroins Romania transfers 97% of the losses incurred until 31.12.2022 and 87% of the losses that should have been registered in 2023. Euroinsdatora has to cover losses of 1.58 billion lei, of which 855 million lei are liquid and 732 million lei are recoverable amounts from reinsurance.

Euroins Romania reported that it has already transferred the rights to the assets. At the same time, the Euroins insurance group.

stated that assets worth 350 million lei will be transferred directly to Euroins Romania, and 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 AFS Council decided to appoint the FSB, as a temporary administrator, to take all measures

on the termination of the contract with EIG Re.