Prosecutors with the General Prosecutor’s Office on Thursday morning were seizing documents from the City Insurance company’s headquarters, as part of a criminal case opened following a complaint filed by the Financial Supervisory Authority (ASF).
The representatives of the General Prosecutor’s Office claimed that there were no searches, but documents were seized from the insurance company.
Another criminal case regarding the insurance company is also in progress at the DIICOT (Directorate for Investigating Organised Crime and Terrorism), for committing the offences of an organized criminal group, fraudulent bankruptcy, embezzlement, IT forgery and use of forgery. This file was opened a few months ago, following a complaint filed by City Insurance and would concern several former and current employees of the company.
On 17 September, the ASF decided to withdraw the operating authorization of the Insurance-Reinsurance Company City Insurance and requested the opening of bankruptcy proceedings against the company.
Between 2014 and 2021, the ASF imposed on City Insurance SA, but also on the management of the company, several sanctions, respectively fines totalling 18,736,666 lei and issued a decision to increase the solvency capital applied to the company of 16,500,000 euros.
Scandal in the insurance sector : Government adopts emergency ordinance amending law on Insurance Guarantee Fund
City Insurance, Romania’s leading issuer of civil liability insurance for car owners, went under the special administration of the Insurance Guarantee Fund in early June, and has failed to submit in due time the amount stipulated in the relevant minimum capital requirements. Financial Supervising Authority (ASF) has announced that without this amount, of over 150 million euro, the company, which has issued some 3 million car insurance policies, can no longer continue to operate in Romania.
“The authority ordered the company to submit, by the deadline stipulated by law, a short-term financing plan-in other words, to prove it has the money to cover the minimum capital requirement. Then they were supposed to come up with a recovery plan to prove they meet the solvency capital requirement. Also, to ensure a prudential management of this company, the Financial Supervising Authority appointed the Insurance Guarantee Fund as a temporary administrator,” stated for Radio Romania International Dan Apostol, spokesman for the Financial Supervising Authority.
The investigation into the company’s bankruptcy points to possible frauds and operations conducted in tax haven countries, says the head of the Insurance Division of the Financial Supervising Authority. According to Valentin Ionescu, City Insurance declared fictitious amounts in its accounts, and the reinsurance was conducted via offshore accounts difficult to verify.
“This company placed outwards reinsurance on 90% of its contracts, going to tax havens. We investigated with the authority in the Cayman and Barbados, the answers took a year to reach us, and we found there are also problems with respect to the insurance of this company, “ said Ionescu.
The Financial Supervising Authority cancelled City Insurance’s license, declared the company insolvent and initiated the bankruptcy procedure.
At present, there are tens of thousands of cases involving damaged cars with City Insurance policies, and the claims will be taken over by the Insurance Guarantee Fund, which will cover the damages. Meanwhile, the government is working on 2 emergency ordinances on the insurance sector, which are currently pending approval by the Competition Council, PM Florin Cîţu announced. One of the orders concerns policy prices, and the other one provides for some form of protection for the clients of City Insurance, if necessary. The latter is aimed at stepping up the payment of claims for policy owners.
Under the current legislation, car owners have to wait months and even years for the court to rule the company bankrupt, as it was the case with 2 other companies, Carpatica and Astra, which left the insurance market several years ago.
Law on the Insurance Guarantee Fund amended by emergency ordinance
The Government adopted on Wednesday an emergency ordinance amending the law on the Insurance Guarantee Fund, following the insolvency of City Insurance.
“We have adopted an emergency ordinance amending the law on the Insurance Guarantee Fund as a result of the insolvency of City Insurance. I want to make sure that all those who have been damaged do not suffer from this bankruptcy,” Prime Minister Florin Citu said at Victoria Palace.
Compiled from Radio Romania International and Agerpres