In order to assess whether or not an insurance company is in a state of insolvency, the yardstick to be used is not the same as for any other enterprise.

The fact that an insurance undertaking, owing to the inadequacy of its provisioned reserves, is forced to pay compensation using liquidity originating from the premiums collected (which should be used to cover risks not yet matured) may well constitute – regardless of whether such conduct qualifies as seriously irregular in terms of management – a clear indicator of its incapacity to fulfil properly, or by normal means, its obligations.

This is the view of the Court of Cassation (Civil Section I dated 27 January 2014 no. 1645) which dismissed the appeal aimed at rejecting the claim for declaration of insolvency, denouncing the breach and misapplication of Articles 5 and 202 of the Bankruptcy Law as well as the special regulations in relation to insurance, as the lower Court had based its ruling upon purely accounting details (solvency margin, guarantee fund, technical reserves) and on the capital deficit only resulting from the financial statements without considering the substantial goodwill realisable, in theory, by way of the sale of the customer portfolio, or the real estate capital gains.