On September 17, the Council of the Financial Supervisory Authority (ASF) of Romania withdrew the operating license of City Insurance, the country’s largest insurer which owes its position to the massive portfolio of compulsory auto insurance. The ASF will now initiate bankruptcy proceedings against City.
The Romanian insurer, created and controlled until June by the Romanian businessman Dan Odobescu, the brother-in-law of the former Prime Minister Adrian Nastase, did not respect the recovery strategies demanded by the ASF in June.
As part of the strategies, the insurer was supposed to increase its capital by 150 million euros before September 6.
An investment vehicle registered in Switzerland, I3CP, promised to buy new shares issued by the insurer, but failed to find the money on time.
ASF announced that Romania’s largest insurer had failed to demonstrate that it was able to increase its own resources to meet minimum capital and solvency requirements.
The authority also concluded that the company is already insolvent and that its creditworthiness continues to deteriorate.
Under the regulations in force, claims generated by insurance policies issued by the City will now be processed by the Insurance Guarantee Fund (FGA), but payments will not be made until after the City has gone bankrupt.
The government is reportedly in the process of drafting an emergency decree that would allow the FGA to disburse the money within 60 days after the insurer loses its operating license.
According to sources close to the market, City’s portfolio will generate a total of claims amounting to around 100 million euros.
City Insurance is 85% controlled, through Vivendi International, registered in Switzerland, by Odobescu.
ASF officials reported massive fraud to City Insurance, especially after taking over the management of the company in June. Among the frauds spotted, the main owner of City Insurance would have siphoned off 18 million euros since 2017, according to the director of ASF Valentin Ionescu, who investigated the case.
City Insurance has paid 18 million euros to its main shareholder, Vivendi International (Odobescu’s investment vehicle), for fictitious loans since 2017, revealed Ionescu.
Specifically, City Insurance said it borrowed an additional 50 million euros, 25 million euros and an additional 50 million euros this year from Vivendi – but the accounts in Swiss banks indicated by the insurance company do not exist. and Vivendi did not grant any loans to City while collecting interest rates of 10-12%.
Ionescu was appointed to ASF earlier this year, specifically to investigate the situation in the insurance market.
Nicu Marcu, the current president of ASF who was appointed in 2020, has launched extensive checks on insurance companies, including overseas operations. Before Marcu, in 2017-2020, the president of ASF was Leonardo Badea, the current vice-governor of the National Bank of Romania (BNR).
In an interview with Radio Europe Libre, Ionescu revealed other irregularities at City Insurance, such as the underestimation of the cost generated by the green cards issued, which had the effect of underestimating the capital requirements.