​Eurohold Bulgaria AD and Euroins Insurance Group AD (EIG) have officially notified the government of their intention to seek international arbitration to protect the group’s investments in Romania, unless the ongoing dispute regarding the Euroins Romania case is quickly resolved and the losses incurred by the groups are adequately compensated.

The holding company has already sent a notification to the Romanian government in this regard, which is the first official step towards the initiation of international investment arbitration under the investment protection treaty signed between the governments of Bulgaria and Romania.

• “If we do not reach an acceptable settlement within a reasonable period of time, we will protect our investment through international arbitration,” – said CEO of EIG Group Todor Danailov.

“Eurohold” and EIG took the above measure in connection with the decision of the ASF dated March 17 to revoke the license of “Euroins Romania”.

Without providing evidence, the Bulgarians allege that ASF’s actions would have violated EU law and that the decision to revoke Euroins’ authorization would have been arbitrary, disrupting the insurance group’s operations in Romania.

EIG: Estimated compensation so far will be at least €500 million

The Bulgarians argue that the parties involved in this investment dispute now have an opportunity to resolve the issue through negotiations before resorting to arbitration.

• “If an adequate solution is not reached, Eurohold and EIG are ready to start international investment arbitration against the Romanian government. Compensations calculated up to this point will amount to at least 500 million euros. This is stated in the statement of the Bulgarian group.

Eurohold and EIG also say they will be advised in the upcoming litigation by the multinational law firm Pinsent Masons, which has 27 offices on 4 continents, as well as Djingov, Gouginski, Kyutchukov & Velichkov (DGKV), one of the largest business law firms in Bulgaria.

EIG notes that it was one of the largest investors in the Romanian insurance market, having invested around 280 million euros.

The bankruptcy case of “Euroins” also reached the European Court

Euroins Insurance Group (EIG), part of the Bulgarian group Eurohold, announced in August this year that it has filed a formal appeal with the Court of Justice of the European Union (CJEU) against the European Insurance Authority EIOPA’s report on the financial problems of the former leader of RCA, Euroins Romania. The Bulgarians claim damages caused by the way this report was compiled, issued and presented.

• “EIOPA’s report on Euroins Romania’s technical provisions (as of 30 September 2022) was published on 28 March, 11 days after the FSA revoked EIRO’s licence. At the same time, EIOPA has not published any official document with reference to this report, and no official document on this matter has actually been submitted to the EIG.
• This meant not being able to inform myself of the results, defend myself and respond to the allegations in the public space, given that in the following days, fragmented parts of this EIOPA report were leaked to the press to several Romanian publications, which constitutes another violation of the rules in the field.
• In addition, the same report was presented by the Bucharest Court of Appeal of the ASF, which further limited EIG’s ability to provide the best legal protection for the interests of its insured clients and shareholders.
• The insurance group subsequently challenged the report at the Board of Appeal (BoA) of the European Supervisory Authorities (ESA), arguing that it significantly undermined the company’s right to a defence, failed to comply with the principles of the rule of EU law and ignored the initial request by EIRO’s Impartial and Independent Reserve Review Panel.
• On June 8, the ESA Board of Directors decided not to consider EIG’s appeal on the merits.” This is stated in the press release of the Eurohold group sent on Thursday.

The ASF told the government that the EIOPA report confirmed the financial problems at Euroins

We remind you that the Financial Supervisory Authority (FSA) by its decision No. 262/17.03.2023 on revoking the license to operate Euroins Romania, at the same time noting the state of insolvency of the company, subject to the presence of a solvency capital deficit (SCR) in the amount of 2.2 billion lei and a minimum deficit capital (MCR) 1.75 billion lei.

On April 5, 2023, ASF management was summoned to the Government to explain the RCA price cap in the context of the new major bankruptcy in the RCA market in Euroins, at which time Valentin Ionescu, General Director of Insurance at ASF stated that EIOPA had carried out its own analysis and confirmed the decision, adopted in the case of Euroins.

• “EIOPA confirmed the analysis of ASF and the decision of ASF in Euroins. We and the Bulgarian authorities have also received this report, but we cannot make it public because we do not have the consent of the European authority. I can confirm what appeared in the press. EIOPA’s adjustments for technical provisions and reinsurance are the main adjustments we’ve had.
• The main adjustments relate to best estimates, gross technical provisions and reinsurance allowances. The need for SCR is public, it is in the solution somewhere at the level of 2.2 billion lei, i.e. 440 million euros. EIOPA comes and confirms our amount, actually there is something higher in EIOPA’s adjustment.”, the ASF director said at the time.

Eurohold accused of possible illegal leakage of information / Such conclusions of EIOPA could refer only to very old financial periods

In connection with the information regarding the EIOPA report, the Bulgarian group Eurohold reacted on Wednesday, alleging that leaking such information from the report, which Euroins did not receive, would violate the law.

• “Neither Eurohold, nor Euroins Insurance Group, nor its shareholders and representatives have received any official control report or any other valid document regarding the capital or solvency of Euroins Romania. Leaking such information could mean that an official agency has broken the law.
• Since we have not received such an audit report, we do not know what the conclusions of such a report are. Such conclusions may only apply to older financial periods, for example, from September 30, 2022. As I mentioned earlier, the reinsurance contract with EIG Re covers all the risk related to the Euroins Romania portfolio, including claims, as well as possible increases in the reserve and possible reductions in the coverage of previous reinsurance contracts that were valid before the one signed with EIG Re .
• We emphasize once again that the reinsurance contract of Euroins Romania with EIG Re was valid from January 1 to March 17, 2023. The decision of the ASF to revoke the license and open the bankruptcy procedure of Euroins Romania was made on March 17, 2023. , was the same act that terminated this reinsurance contract and left all insured customers without insurance protection and coverage.
• Finally, the shareholders of EIG, including the EBRD, submitted a concrete proposal to the ASF that would have saved all the costs of the FGA and prevented the chaos that had occurred in the Romanian insurance market. We are prepared to present this proposal publicly when appropriate. We have also submitted this proposal to the Bulgarian Regulatory Authority (FSC) and EIOPA.”, filed by the Eurohold group.

RCA prices are capped until the end of the year due to growth fears

On April 5, the Chuke government approved RCA price caps for 6 months at the end of February 2023, with one condition: during this period, the ASF and the Competition Council will make the necessary changes to the RCA law in order to avoid future crises and bankruptcies.

However, the necessary changes to the RCA law did not arrive, although the PSD-PNL government was rounded up.

The new government led by PSD leader Marcel Čolaku decided on October 5 to extend the RCA price cap period until the end of this year.

• Read more: RCA prices remain frozen until the end of the year. Cholaku: They would raise rates at the most inopportune time, during the winter holidays