ASF HAS HELD ITS FLORAL ARRANGEMENT A star has fallen: Astra

The Financial Oversight Authority (ASF) has yesterday made official the bankruptcy of Astra Asigurări, the biggest in history on the Romanian insurance market.

The Board of the ASF has yesterday decided to ask for the company to enter the bankruptcy proceeding, after the share capital increase, coordinated by the special administrator KPMG Advisory, failed.

Cristian Muntean, the president of the Association of Independent Vehicle Services (ASSAI), said that he expects the price of insurance policies to increase, after Astra's bankruptcy.

He said: "The bankruptcy of Astra Asigurări is an unpleasant piece of news for all insurance policy holders, since it will be felt in the insurance premiums, most likely in December, when policies get renewed.

The Astra bankruptcy is a good argument for insurers hiking prices".

Cristian Muntean added that Romania had a low risk rating, so that reinsurers will raise the prices for Romanian insurers, which will be felt in the customers' pockets.

Furthermore, in his opinion, the ASF will increase the required contribution to the Fund for the Guarantee of Insurance Holders (FGA), after it will spend almost entirely its resources on the Astra policyholders.

The ASF yesterday said that for the near future, it is not considering a hike of the mandatory contributions to the Fund for the Guarantee of Insurance Holders in the immediate future.

Cristian Muntean expects the procedure to compensate the Astra customers to take about a year: "The FGA will begin to make payments after it goes through various procedures. The Astra victims should not expect quick payments.

if we look at other bankruptcies in the market, which took place ten years ago, sometimes the payments have even been made seven years later".

People that have insurance policies with Astra that get into an accident will have major trouble in finding a workshop that would perform the repairs, the president of the ASSAI further says: "These victims will probably have to pay their own repair work out of their own pocket and then talk to the Fund for the Guarantee of Insurance Holders".

• Piperea: "Many mortgage loans have Astra insurance policies attached to them"

Lawyer Gheorghe Piperea says that the Astra bankruptcy has some very serious consequences, aside from the fact that many people will have to take long trips to file requests for compensation with the FGA and renew their policies with other companies.

He said: "Aside from guarantees, real estate/mortgage loans require insurance policies for the properties or life insurance policies. Many loans, from 2006-2007, have policies signed with Astra.

Furthermore, many public institutions, which have organized calls for bids, have aberrantly accepted, Astra insurance policies as guarantees.

The CNADNR has been awarded a definitive and binding court ruling which requires Astra to pay the amount of 95 million lei, based on a policy. Now, it needs to become part of the body of creditors.

Another example is Tarom which now has to repay significant amounts to remake its insurance policies again.

I personally have filed a request for the bankruptcy of Astra because it did not pay me 10 million Euros at Oltchim. The request was denied, not because the company wasn't bankrupt, but because the ASF intervened and said that it cannot ask for the bankruptcy as long as the company is in receivership.

This was a method of concealing the bankruptcy, for someone to lose their trail, and not be held liable".

In the opinion of Gheorghe Piperea, the fact that the ASF asked for a capital increase of 490 million lei, when 1 billion lei was necessary, means that "the turnaround was not wanted nor possible".

He says that it will be interesting to watch the reaction of the reinsurers.

"I wouldn't be surprised if KPMG was appointed as a liquidator as well, as a well-deserved reward for failure", the lawyer further said.

• Negriţoiu blames Adamescu's greed

"The failure of the last rescue stage of the capital increase intended to save Astra, in spite of the interest from some internationally reputed investors, was mostly caused by the absence of the collaboration from the main shareholders (ed. note: Dan Adamescu)", the ASF said yesterday.

According to the head of the Authority, Mişu Negriţoiu, over 30 strategic investors have been contacted, and at least five have reached the latest stage of the diligences for the increase of the capital of Astra.

The president of the ASF said that the investors with which the talks arrived at the most advanced stage, on their becoming shareholders of Astra were Ergo (Germany), PZU (Poland) and Fossum Group (Portugal).

"Despite the true interest shown by certain potential investors, the existing majority shareholders have asked for a price that was considered excessive given the capital injections that would be needed in the future, as the proposed evaluation of the shares was considered unrealistic", the ASF said, in a press release, adding: "The full subscription by an investor of the amount of 425 million lei stipulated for the second stage of the share capital increase would have ensured a maximum stake 62% of Astra, but the investors interested in the company wanted absolute control, invoking the reputation of the old shareholders, among other things. As a result, the capital increase should have been accompanied by a transaction in which the current shares would be sold, a deal which could not take place due to the price that was being asked which was far too high from the point of view of potential investors".

When asked why, one month ago, the discussion revolved around Astra getting "married", and now it has been decided for it to be "buried", Negriţoiu replied: "Greed!"

He said that he had talks with the shareholders of Astra, who told him, one month ago, that they wanted to sell, and now they've changed their mind.

After the capital increase failed, the shareholders have proposed a turnaround plan whereby they would contribute 150 million lei by the end of the year, and the balance of 275 million lei by September 30, 2016. The Nova Group Investments and Epsilon Estate Provider, controlled by businessman Dan Adamescu, have also asked the ASF to suspend the receivership, as well as the restrictions on premium subscriptions which it had applied in May, as well as to allow Astra to acquire AXA Life Insurance.

The president of the ASF said that this request was conditional, uncertain, insufficient and contradictory: "The amount of 150 million lei proposed by Adamescu has to be spent tomorrow, Astra's debts exceed 200 million lei. We can not wait for the end of the year, to afford to threaten the insurance policies and the interest of the insurance policy holders. By the end of the year we will need not 150 million lei, but 1 billion lei".

• Negriţoiu: "The Guarantee Fund has the capability of absorbing the demands for compensation"

The Fund for the Guarantee of Insurance Policy Holders (FGA) has the ability and the resources to cover the demands for compensation from the Astra policy holders, according to the law, Mişu Negriţoiu said yesterday.

After the Astra bankruptcy was declared by the court of first instance, the compensation cases get transferred to the FGA within 30 days, according to the president of the ASF.

"The next step which we will have to make for the Fund for the Guarantee of Insurance Policy Holders (FGA) to step into action is to present the request for entering bankruptcy and to get the court ruling. The FGA only steps into action after the company becomes bankrupt", he clarified.

Carmen Radu, the president of the FGA, said that between the present time and the declaration of the bankruptcy, the insurer will be accepting compensation applications, but they will not be allowed to sell new policies anymore: "Customers will be dealing with Astra, until the Fund takes over the policies. The Fund will only be able to make payments one month after the announcement of the bankruptcy".

According to the representatives of the ASF, Astra has 1.8 million insurance policy holders and 2.5 million policies.

"The amount of the compensation reserves is 650 million lei, the impact which we have calculated is 700 million lei and the fund has 1 billion lei available", according to Negriţoiu.

the compensation cap for one insurance policy holder is 450,000 lei, and the head of the ASF thinks that most of the insured fit within that cap.

As a result of the decision of the Board of the ASF to withdraw Astra's receivership, the management of the company will be taken over until the bankruptcy is declared by the executive management prior to the receivership mandate being instituted.

The Board of the FGA can work, the representatives of the ASF have further said, because the Ministry of Finance has appointed Ştefan Nanu, the head of the Treasury, as a member, along with the three members already appointed by the ASF. The Ministry of Finance can also appoint another member in the management of the FGA.

On June 30 2015, Astra was seeing a negative available solvency margin of approximately 871 million lei, a liquidity ratio of 0.03 and a capital need of approximately 968 million lei.

Adina Ardeleanu

• Andriescu (UNSICAR): The money from the Fund for the Guarantee of Insurers will cover the compensations of Astra

The money from the Fund for the Guarantee of Insurers will cover the compensations that will be granted in the case of the bankruptcy of Astra Asigurări and it is even possible there may be some funds left, the president of the National Union of Insurance Intermediation and Consulting Companies, Bogdan Andriescu, said yesterday (UNSICAR).

"The consequence of this situation (Astra going bankrupt - ed. note) will be bearable by the insured. The compensations will be paid either out of the money that currently exists at Astra, if it exists, I do not have that information, and the moment those funds are depleted, the Fund for the Guarantee of the Policy Holders goes into action, which will cover the compensations. Sure, it won't happen overnight, it is not a process that will just take a week, it will take a long time, but for the health of the market it is very good. I think that the money in the Fund for the Guarantee of Insurance Holders will cover up the compensations, it is even possible that there would be some left", said Bogdan Andriescu, quoted by Agerpres. He says that a decision in the case of Astra was required, as the company had been having low solvency and liquidity indicators, which was not healthy for the market.

According to Bogdan Andriescu, the contributions to the Fund for the Guarantee of Policy Holders may increase a bit in the coming period because it needs to be rebuilt, as the existing amount at this time is minimal to be able to handle that kind of situations.

On the other hand, Bogdan Andriescu says that the only customers that will feel some of the effects will be two companies that are expected to receive significant compensations, given that the compensation has been limited to 100,000 Euros per individual or company.