Romanian market regulator decides on bankruptcy for Astra insurer

By bne IntelliNews August 27, 2015

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Romania’s financial market regulator ASF, based on a report by special administrator KPMG on August 26, terminated the special administration at local insurer Astra, withdrawing the operating license of the insurer, confirming its insolvency and deciding to request in court its bankruptcy. This is the biggest bankruptcy in Romania’s insurance sector, though the head of ASF says the bankruptcy poses no systemic risk to the sector.

KPMG announced on August 19 the failure of the capital increase at Astra, which was the key element of the company’s recovery plan. The compensations to be paid to Astra's policyholders are estimated at RON700mn (€160mn) and it is not clear how much of this can be recovered from Astra's reserves.

On June 30, Astra's available solvency margin registered a negative value of approximately RON871mn, a liquidity ratio of 0.03 and capital needs of approximately RON968mn, ASF announced in a press release.

Astra is the third largest insurer in Romania and had been until a couple of years ago the market leader.

The capital increase failed because of the owners' greed, ASF president Misu Negritoiu stated. There had been several investors interested, Negritoiu said, mentioning Ergo of Germany, Fosum Group of Portugal and PZU of Poland.

The company is indirectly owned by local investor Dan Adamescu, who, in a statement for Ziarul Financiar daily, objected to the ASF decision. Adamescu will challenge in court the bankruptcy and claims to have submitted a recovery plan for Astra. There was no real offer for Astra from investors because ASF made this impossible, Adamescu said, responding to Negritoiu's criticism.

The bankruptcy poses no systemic risk and will not have significant costs for the Insurance Guarantee Fund (FGA), Negritoiu stated. The holders of insurance contracts with Astra will have their contracts transferred to FGA within 30 days.

"The impact of the insurance contracts is RON700mn and FGA holds RON1bn of reserves," Negritoiu stated. Astra holds RON650mn in compensation reserves, he added. ASF will not require insurers to make supplementary contributions immediately after Astra’s bankruptcy, since the reserve funds are enough to cover Astra's losses.

Astra's bankruptcy became predictable after the capital increase failed on August 19. There was no significant subscription under the last stage of the capital increase, and there has been no request for postponing the deadline, the insurer’s special manager KPMG announced when the deadline expired on August 19. The company’s recovery is not possible without the capital increase, KPMG explained.

Astra needed to find a private investor by August 19, the deadline for a RON425mn (€95.5mn) capital increase calculated by ASF. Company shareholders contributed only RON134,000 in the first two stages of the capital increase operated under the management of KPMG, Ziarul Financiar daily reported on August 6.

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