MUCH HAS been written in the last few days about the collapse of Olympic Insurance, while the supervisor of the insurance industry Victoria Natar issued a statement on Wednesday saying that all the legal procedures were followed in putting the company under administration. “The Commissioner of Insurance has followed all the procedures, within the time limits set by the law in the case of the insolvency of an insurance company, with the protection of the insured being the consideration,” said the statement.
The Commissioner withdrew the licence of the company last May because it did not satisfy the capital requirements stipulated by the law, there was an appeal against the decision, which the finance ministry rejected in mid-July and earlier this month Olympic Insurance was placed under provisional administration; its liquidation will follow. Cars insured by the company and involved in crashes will be covered by the Insurance Fund as far as third-party damages were concerned, while the insured, would pay their own car damages out of their pocketS.
The fall-out of Olympic’s bankruptcy was much bigger in Bulgaria, where close to 200,000 car owners were affected. The issue was discussed in parliament, the prime minister became involved and led to the resignation of the deputy chairwoman of the Financial Supervision Commission. There has been speculation over whether Cyprus would be liable for the compensation of the company’s Bulgarian customers, but this seems unlikely.
While the Insurance Commissioner followed the letter of the law in closing down the company there is another issue she failed to address in Wednesday’s announcement. Had her office exercised all the necessary checks when the struggling Olympic Insurance, which was known to be deep in trouble throughout the industry, was bought in January 2016? If her office had done its research, it would have found that the man buying the firm had a suspect business reputation that had been highlighted by other EU countries. Who would buy a small insurance company teetering on the verge of bankruptcy?
This was a question a diligent supervisor, whose priority was the protection of people, would have asked when the takeover was being discussed. Had due diligence of the buying company been carried out? Had the directors’ backgrounds been checked by the commissioner’s office? It is in this respect Cyprus’ supervisory and regulatory authorities consistently fail to protect the public – collapse of stock market and the banking sector are prime examples.
It is no consolation that the Insurance Commissioner followed all legal procedures once Olympic Insurance did not satisfy the law’s capital requirements. Rigorous supervision would not have allowed things to come to this, but it has become a habit of our supervisors to do too little too late.