On 27 December 2016, the Board of the Romanian Financial Supervisory Authority (“FSA”) analysed the status of the insurance and reinsurance undertaking LIG Insurance SA, ultimately, commencing bankruptcy procedures against LIG Insurance SA and withdrawing its license to carry on insurance and reinsurance activity (FSA Decision 2347/2016).
According to the FSA, on 31 October 2016 the company had: (i) negative own capital of RON 56.2 million; and (ii) a liquidity ratio of 0.44, resulting in concern over its capacity to cover its due obligations using own funds.
LIG Insurance SA must hand over complete records of its claims to the Insurance Guarantee Fund within 30 days of the FSA decision’s publication in the Official Gazette (i.e. 5 January 2017) so that the list of potential insurance creditors can be published in accordance with the law.
The company must notify the insureds with regard to their option to: (i) terminate the insurance agreements concluded with LIG Insurance SA; and (ii) recover the premium for the unexpired insurance period.
LIG Insurance SA was a relatively small player in the market; its portfolio included risks covered mainly in Romania and Italy.
The Insurance Guarantee Fund guarantees the payment of indemnities and damages derived from voluntary and mandatory insurance policies if an insurance undertaking becomes bankrupt. The limit of payments for insurance claims is RON 450,000 (approximately EUR 101,000) per insurance creditor of the bankrupt insurance company. Payments will only be made for insurance claims that are certain, liquid and due and will made be in the Romanian national currency (i.e. RON).