According to a Romanian Financial Supervisory Authority (“FSA”) press release dated 25 January 2016, the FSA has decided to institute financial resolution procedures for Carpatica Asig SA (“Carpatica”), a Romanian insurance undertaking.
The FSA will now have 6 months to prepare a plan for Carpatica’s financial redress and shall ensure that an independent evaluator carries out a fair, prudent and realistic assessment of the insurer’s debts and capital. The Board of Directors of Carpatica has also been required to take measures to attract a strategic investor in order to cover minimum capital requirements within 3 months and solvency capital requirements within 6 months from the FSA’s decision.
The Romanian Insurance Guarantee Fund has been appointed by the FSA as a temporary administrator, whose main prerogatives will be to supervise the inventory of Carpatica’s assets, prepare and audit Carpatica’s annual financial statements and monitor the manner in which Carpatica will comply with the measures imposed by the FSA, especially with respect to attracting a strategic investor. Carpatica’s management will now need to consult with the Insurance Guarantee Fund and obtain its approval before taking any action involving the insurer’s assets.
Carpatica has been subject to financial redress procedures for over a year and a half, and has failed to comply with the interim milestones imposed by the FSA. Earlier this year, Carpatica’s management declared that the company is in advanced negotiations with a strategic investor and that due diligence procedures were due to start shortly. Carpatica also made a capital infusion of 10 million RON, insufficient however to overcome its financial issues (the capital requirements being somewhere in the region of 90 million RON).