The FGA paid out more than €156 million for just 80,000 files out of 255,000 payment requests in last year’s City Insurance bankruptcy, which now includes Euroins, where the ASF expects payments of more than €250 million. HotNews.ro asked the FGA if they would need money from the government at this rate, and the response indicated difficulties in paying.

Can the FSA pay claims and demands for the return of premiums to the account of Euroins without financial assistance from the Government?

To this question, FGA representatives answered that as of March 22, 2023, the fund had 199.6 million lei in its accounts.

• “Funding sources are provided for by legislation, the FSB takes measures to ensure the availability of the necessary funds. Payments will be made in accordance with the law to the extent possible,” said FGA representatives.

What is the current payment flow at FGA? Payments above income

The Insurers’ Guarantee Fund told HotNews.ro that there is no predetermined daily payout amount. However, the monthly data is worrying.

• “Every month, the FSA makes payments in the amount of approx. 60 million lei. The FGA estimate for contributions from 2023 is an average of 46.1 million lei per month,” say FGA representatives.

How much does FGA still have to pay in the next period based on already approved files from other bankrupt insurers?

• “Out of 255,669 payment claims registered in SC “Mistostrakh”, 80,624 have been resolved to date. The total amount of payments for City Insurance is 767.06 million lei. The amounts paid out for other bankrupt insurers are insignificant,” FGA representatives replied.

When will it make the first payments for Euroins claims and refunds?

• “According to the law, Art. 13 para. (1) of Law No. 213/2015, the FGA has the right to make payments from its assets to insurance creditors within 60 days from the date of publication in the Official Gazette of Romania of the ASF’s decision to revoke the activity permit. (as of March 17, 2023)
• The payment of compensation will be made within 500,000 lei of the insurance indemnity payable according to the insurance contract concluded by the insolvent insurer,” FGA reports.

FGA: Payments to victims of Euroins will be made in parallel with the remaining payments to other bankrupt insurers

HotNews.ro asked if the payouts for Euroins will come after the already approved files for the remaining bankrupt insurers have been paid out.

• “The updating of loss files, as well as the payment of compensations/reimbursements or premium refund requests, will be carried out in parallel, as in previous cases of bankruptcy of insurers,” the Fund replied.

Are the current payout rates stable compared to the income received to pay the claims as well

• “The current rates of payments are correlated with the level of current incomes. The FGA will make every effort to use the statutory provisions on sources of income so that it can make payments in a reasonable time to all creditors of the companies it manages,” FGA representatives also said.

According to preliminary data sent to FGA HotNews.ro, “until March 10, 2023, FGA paid 557.3 million lei for Astra Asigurări, 501.9 million lei for Carpatica and 739.9 million lei for City Insurance.

How FGA makes money: RCA insurers’ contributions are reflected in the price policyholders pay

If it needs financial resources, the Fund can meet its liquidity needs at the expense of 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 decision, in accordance with the provisions of Art. 59 liters b) from Law No. 246/2015.

Premiums paid by RCA insurers have increased this year and this is reflected in the final prices

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 general insurance premium rate from 2.5% to 4%, which leads to an average monthly increase in revenue to a projected level of 46 million lei,” he announced last month in January this year. Insurance Guarantee Fund (FGA).

These successive increases in premiums paid to the FGA by insurers will be reflected in the final RCA prices paid by policyholders.

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