Romanian insurance company “City Insurance” on the brink of bankruptcy

22 September 2021
Knowledge Base

by Dan Mihai

City Insurance is at risk of becoming bankrupt because of its hundreds of millions of euros in debt. The company failed to prove to the Romanian Supervisory Financial Authority (ASF) that it holds the legal minimum amount of money (150 mil. ) in order for it to operate, thus risking its operating license to be taken away. A dutch investment fund of questionable origins bought the insurance company for the necessary amount, but didn’t keep its commitment of making the payment in time. Tens of thousands of opened claims from the City Insurance clients are going to be transferred to the Guarantee Fund for the Insured (FGA).

City Insurance is the largest third party liability insurance provider in Romania at the moment, having a market share of over 45% and being used by over 3 million drivers. The high number of clients is probably given by its extremely low rates, making it the cheapest insurer on the market. Because of its debts and financial problems, the insurance company is being investigated by the Supervisory Financial Authoritiy (ASF) since last year. Although the insurer reported in 2017 that it has certain deposits to a bank, in April 2020 the ASF discovered that there was no contractual relationship between City Insurance and the mentioned bank. Because of this, the ASF applied a 600.000€ fine to the company and 200.000€ fines to each member of the directorate. In addition, a deadline has been established for the insurer to prove that it possesses the minimum legal amount of € 150 million required for an insurance company to operate. The deadline was set to 6 September, which the insurance company did not meet, as it didn’t have the money in its accounts. Legally, its operating license should be canceled, but the ASF didn’t come up with a final decision yet. Although the legal required amount to have is € 150 million, the company would need € 300 million to pay all its debts.

The intention of I3CP  to save City Insurance

I3CP Holdings BV is a Dutch investment fund with offices in Amsterdam and Athens which manages over  € 15 billion in assets. It has bought City Insurance from the previous owner, Vivendi International, for the much needed sum of € 150 million. Although a spokesperson from I3CP stated they took all legal steps in order to buy the insurance company, they did not make the payment yet, which enables the ASF to withdraw City Insurance’s operating license at any given time.

I3CP justifies the acquisition of a nearly bankrupt firm by saying they want to develop an Eastern European insurance agency, with City Insurance being in the center of it. It is bizzare that, besides having generalized and unclear objectives, I3CP is a trademark of Exin Investment Holding BV, which has the same headquarters as former Exin Financial Services Holdings BV, a Dutch company that went into bankruptcy in 2019. The latter was supposed to buy a bankrupt Greek insurance company in 2017 for the sum of € 819 million, a very similar situation to that of City Insurance. However, they kept postponing the payment until they finally cancelled the whole deal. Shortly after, in 2019, Exin Financial Services Holdings went bankrupt. Moreover, the man behind I3CP and Exin Investment Holding BV, Matt Fairfield, had talks with the ASF regarding the City Insurance deal accompanied by a Dutch man. The Dutch man took part in former discussion about selling another Insurance company, Carpatica Asig, to the International Insurance Corporation. However, the deal fell as the IIC didn’t buy Carpatica Asig and the latter went bankrupt.

What will happen to the City Insurance clients’ damage claims

At the moment, there are 3 million people insured through City Insurance. In case the Supervisory Financial Authority takes the final decision to withdraw the insurance company’s operating license, all the claims will be transferred to the national Guarantee Fund for the Insured. Even with the company closed down, the insurance policies will remain available for all clients until their expiration dates, with the FGA paying for all the damages. Although the process is simple for the City Insurance clients, the people hit in traffic by these clients will have to make a separate damage claim to the FGA. After the requests will be analyzed, the payments will go through only after all legal actions against City Insurance will be terminated, which can last for up to a year. Moreover, FGA paying all City Insurance’s debts will mean more expensive insurances for everyone in the country, as FGA gets its money from all the insurance companies on the Romanian market.

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