Underpricing MTPL policies for three years in a row - the main cause for the City Insurance bankruptcy
One of the main causes of the Romanian MTPL market's leader CITY Insurance bankruptcy was the RON 1.2 billion deficit resulting from the sale of insurance policies below the notified tariff between 2018-2021, in order to increase market share, CITR, the judicial liquidator of City Insurance said today.
With 1.15 million RCA policies in force at the end of last year, of which 500,000 were automatically terminated on May 11, 16,305 suretyship policies still in force today related to over 7,000 policyholders, institutions and other legal entities, but also a number of over 10,000 of national and international litigation, the bankruptcy of City Insurance is the largest in the recent history of Romania.
Besides its MTPL dumping tariffs policy, CITY Insurance also lost money from other causes:
"CITR also established deficiencies in the management of funds. Thus, City Insurance paid interest and a successful commission of 147 million lei, related to loans from the majority shareholder and from a foreign company, loans that they were not used by the company ", said Oana MUNTEANU, partner within CITR and Project Manager in the City Insurance case.
- An additional loss of 422 million lei was generated by the fact that City did not take steps to recover the reinsurance receivables, while another 54 million lei resulted from the company's inability to recover the receivables from regressions.
- Losses from non-payment of damages on time, which led to payments of penalties and execution expenses of over 45 million lei
- The constant losses at the level of subsidiaries in Greece and Italy during 2017-2021 created a deficit. of 185 million lei.
- Losses of 57 million lei generated by the non-recovery of some loans granted to the affiliated company City Invest & Management.
- Other sources of losses are represented by some real estate transactions with land purchased at high values, in the period 2012 - 2014, which were subsequently sold at lower prices in the period 2019-2020, resulting in a difference of 42.6 million lei.
Author: Daniela GHETU
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