Cyprus Mail
Cyprus

Olympic supervisor failed to identify shadowy investor

 The failure of Olympic Insurance which is testing Cyprus’s relations with Bulgaria may have been avoided had the supervisor of Cyprus’s insurance sector exercised her duties more rigorously.

Documents obtained by the Cyprus Mail show that the company’s owner had a questionable reputation, at best, as a result of both the way and the type of companies he operated, while Olympic had accumulated claims which exceeded almost four times its annual turnover.

Diego Gonzalez Alonso, a Spanish citizen and owner of Olympic’s Luxembourg-based parent company Hispakol S.A., was named in a June 2015 statement issued by Spain’s Comision Nacional del Mercado de Valores (CNMV), which supervises the Iberian country’s financial markets, warning investors of his activities.

The Spanish supervisor’s statement was referring to NYSB Funds Management, a subsidiary of the Comoros-based New York Securities Bank (NYSB), owned and controlled by Gonzalez Alonso, which “is not authorised to provide the investment services detailed” in Spain’s Securities Market Act.

Gonzalez Alonso acquired Olympic in January 2016, when Hispakol bought all 7,876,502 shares from the insurance company’s previous owner, Clenmay Enterprises Ltd. The following month, Gonzalez Alonso became director in Olympic Insurance together with four more Spaniards, Carlos Canovas Goller, Montserrat Cawadell Abril, Jorge Gonzalez Garcia, and Marcos Alexander Isaac. All of them have meanwhile resigned as directors with the exception of owner Gonzalez Alonso and director Gonzalez Garcia.

The services which NYSB Funds Management was not allowed to offer concerned investment advice in relation to the financial instruments, including transactions in foreign currency, CNMV said.

According to a separate document obtained by the Cyprus Mail, Olympic’s auditors, Baker Tilly, were unable to verify that the company was indeed in possession of a €150m government bond issued by the government of Brazil. The auditors were also unable to verify whether a subsidiary of Olympic was in possession of immovable property which according to its directors was worth €24.6m.

Olympic’s claim that it also possessed corporate bonds worth €22.8m, issued by its parent company Hispakol, could not be confirmed by its auditors, the document shows.

Furthermore, Baker Tilly was unable to find confirmation that Olympic had €11.9m in deposits with Black Eagle Securities Bank, a lender based on the East Indian Ocean island state of Comoros. Lastly, the auditors were unable to prove the existence of €1.9m in receivables.

Gonzales Alfonso’s Luxembourg-based NYSB Financial Group established several other affiliated companies around the world, many of which are no longer in operation. Meanwhile, the NYSB units in the US and the UK have been shut down while a unit in Latvia was placed in insolvency.

While NYSB’s website http://www.nysb.biz/ is no longer in operation, that of the Comoros-based NYSB Bank at https://nysbbank.com/ is online and claims to have a capital in excess of €4bn.

The licence number of NYSB Bank in Comoros is L10960 and it coincidentally matches that of Black Eagle Securities Bank.

Olympic, which generated a revenue €4m in Cyprus in 2016, is currently facing around 2,500 claims in Cyprus worth around €15m, according to the documents obtained.

In Bulgaria, where it had a 9 per cent market share and around 200,000 third-party insurance policies to drivers, the company is facing 9,500 claims totalling €28.5m. The question of who is liable for these claims has hurt bilateral relations and Bulgarian authorities have asked Cyprus to foot the bill.

Ralitsa Agayn, the deputy chairman of Bulgaria’s Financial Supervision Commission, KFN, resigned on Tuesday, when Olympic’s failure was debated at the parliament in Sofia in the presence of Prime Minister Boiko Borissov. She had been criticised by Bulgarian Finance Minister Vladislav Goranov.

Victoria Natar, Superintendent of Insurance and head of the Insurance Companies Control Service (ICCS), a division of the finance ministry, did not respond to repeated requests for comment.

Natar’s ICCS issued a statement on Wednesday in which it said that it had revoked Olympic’s licence on the grounds that the company failed to satisfy the minimum capital requirements provided by the law. The initiation of the company’s liquidation was delayed after Olympic challenged the ICCS’s decision to revoke its licence in May; the finance ministry upheld Natar’s decision in July.

Natar’s statement explains what led to the appointment of the provisional liquidator Pavlos Nacouzi and that the Motor Insurance Fund would cover third-party claims against customers of the insolvent company. There was no mention, however, of her office’ failure to identify the serious problems the company had been facing long before its licence was revoked.

Michalis Papadopoulos, a finance ministry official, said in a telephone interview on Wednesday that Gonzalez Alfonso’s approval as director and owner of Olympic resulted from “an audit provided by legislation for permission to participate in the board of directors of a company”.

“Both then and likely also now, these persons fulfil the preconditions for board membership,” he continued. “When the audit was carried out to approve these persons, nothing problematic was discovered”.

Auditor-general Odysseas Michaelides said in a Twitter message on Thursday morning that the Audit Office had spotted Olympic’s shortcomings when it carried out its audit for 2014.

“It was one of the two companies that would face problems with the introduction of Solvency II and required constant monitoring,” he wrote.

In the same report, Michaelides said that the ICCS only examined whether directors were fit and proper for the job only ahead of their appointment and did not carry out such checks at regular intervals thereafter.

The Solvency II European directive, which entered into force with considerable delay, introduced a harmonised, prudential framework for insurance firms across the European Union.