The Romanian Financial Supervisory Authority (“FSA”) decided to open plan-based financial recovery proceedings against Societatea de Asigurare-Reasigurare City Insurance S.A. (“CITY Insurance”), a Romanian based insurance and reinsurance undertaking. The main goal of the proceedings is to restore CITY Insurance’s solvency capital requirement within six months and its minimum capital requirement within three months.
The FSA’s decision is based on several findings regarding CITY Insurance’s activity, including: (i) late payment of damages related to the Green Card System; (ii) debt amounting to 85% of the overall debt toward reinsurers of the risks related to motor third party liability; (iii) a significant exposure to risks related to suretyship insurance (class 15) reported to its overall net assets; and (iv) lack of a prudent valuation of the receivables owed to it by various affiliated companies and other debtors.
Within 20 days from receipt of the FSA decision, CITY Insurance’s board of directors must file its recovery plan with the FSA. The plan must address: (i) its financial recovery; and (ii) specific methods and deadlines for the assumed actions regarding its ability to cover the solvency capital requirements and minimum capital requirement, change of risk profile (as the case may be) and observance of liquidity ratio.
CITY Insurance will continue to pursue its activity, but its underwriting activity will be limited to 75% of its overall gross insurance income from 2015. It will not be permitted to write new suretyship risks. All policies issued before the FSA’s decision remain valid and produce full effects.