The liquidation of Olympic Insurance, which resulted from its failure to satisfy capital requirements, has raised questions over who is ultimately responsible to compensate victims of traffic accidents caused by drivers insured by the insolvent company, stakeholders said.
The company, whose winding up was petitioned at the court on August 10, had its licence stripped over concerns about its solvency, Pavlos Nacouzi, provisional liquidator said on Tuesday.
Olympic’s “auditors declined to express an opinion about the existence and value of certain assets which meant consequently, that the company could not satisfy capital adequacy requirements,” Nacouzi said. “Hence, the superintendent of insurance revoked the licence in May”.
The assets in question included securities and immovable property in non-EU countries, which he didn’t specify.
“Olympic contributed over the years 16m Bulgarian lev (€8m) to the fund, which does not consider itself responsible in paying Bulgarian victims of Olympic insured drivers”.
Now questions remain open over which fund tasked with insuring victims of traffic accidents involving drivers who bought a third-party insurance from Olympic will be responsible for covering cases in Bulgaria.
The company’s insolvency caused shockwaves in Bulgaria in which it was one of the largest insurers in the third-party liability business with 197,551 customers and a market share of 9 per cent.
The value of affected policies in Bulgaria is estimated at around €20m. While the company was relatively big in Bulgaria, its operations in Cyprus, where it was based and supervised, were smaller and accounted for €4m, or around 0.5 per cent of the sector’s total premiums in 2016, according to the website of the Insurance Association of Cyprus.
The Balkan country’s Foreign Minister and Deputy Prime Minister Ekaterina Zakharieva summoned Cypriot ambassador Marios Kountourides on Monday over the matter. Officials of the ICCS, which supervises Cyprus’ insurance companies, also met with a Bulgarian diplomat in Nicosia on Tuesday.
The Cyprus Mail understands that according to preliminary estimates, the value of refundable premiums and claims from accidents that occurred before the termination of the contracts last week could be as high as €50m.
Akis Papachristodoulou, general manager of the Motor Insurance Fund (MIF) which compensates victims of accidents caused by drivers that are either uninsured, unknown, or holders of a policy from an insolvent company, said the fund is primarily responsible in cases of accidents involving Cyprus-registered vehicles.
“There are some obligations for policyholders in other countries deriving from cross-border agreements signed by the MIF,” he said. “The MIF has already signed such an agreement with its Bulgarian counterpart”.
Although details of the Cypro-Bulgarian agreement remain unclear, Papachristodoulou said that given the expected revenue the liquidation is expected to generate, “we believe we have the means to cope successfully with the case of Olympic Insurance”.
The failure of Olympic led to the resignation of Ralitsa Agayn, the deputy chairwoman of Bulgaria’s Financial Supervision Commission KFN, according to the Sofia Globe news site. Agayn submitted her resignation to the parliament which interrupted its summer recess. It was in response to criticism of Finance Minister Vladislav Goranov.
Goranov accused her of failing to notify the government and his ministry of the possible impact Olympic’s failure would have on the Bulgarian market, the Sofia Globe reported. Agayn said that with her resignation was “an emotional and moral act” and not and not an admission of failure.
Prime Minister Boiko Borissov told lawmakers on Tuesday that the government would set up a task force of experts from all parliamentary-represented parties to draft a solution to compensate customers of the failed company, who now have to purchase new insurance policies for the rest of the year.
According to Agayn, the average loss for each of the 197,551 affected policy holders in Bulgaria will be around 200 Bulgarian lev, which is less than €100. The company, she continued, had attracted a relatively small number of complaints since 2009 when it entered the market.
She added that Olympic was fined totally 30,000 Bulgarian lev compared to a total of 1.1m Bulgarian leva imposed last year alone.
When the court issues the winding up ordered, it will apply retrospectively from the date of the petition, and affected policyholders will have to claim a refund by filing an application in Cypriot court or the Cypriot embassy in Bulgaria, Nacouzi said. Policy holders and accident victims have a priority in the liquidation of the company.