Romania: consequences of the City Insurance bankruptcy
With a 45 percent share of the motor liability insurance market, City Insurance was one of the most important players in the Romanian insurance industry, but now it has gone bankrupt. National observers focus on the consequences for policyholders.
The state left its citizens in the lurch
It was the duty of the financial regulator ASF to protect the citizens from this disaster, republica.ro rails:
“The bankruptcy of City Insurance is unpleasant for the customers who trusted a state-regulated and supervised system. Liability insurance has long been the preserve of the state, precisely because it is compulsory. It is the state, not the market, that must provide assurance to citizens that the system it manages on our behalf will not degenerate into a giant fraud. ... Those who turn a blind eye must be severely punished, from the mastermind to the followers. The salaries of the ASF bosses are enormous and commensurate to their responsibility, which implies their paying attention and nipping such bankruptcies in the bud.”
We all know who will end up footing the bill
In the end it's the customers who will pay the price for this mess, Ziarul Financiar reminds readers:
“Everyone is saying: Never mind, the government will issue an emergency decree and the liability amount of the three million policies will be taken over by the guarantee fund managed by the Financial Supervisory Authority. Really? Where does the money in the guarantee fund come from? Out of thin air? No. The money comes from the special levies on the insurance policies. The damages caused by Astra and Carpatica [two other insolvent insurance companies] are paid through a one percent surcharge on each liability insurance premium. In future, City Insurance may need to charge five percent extra on each policy to cover the damages and liabilities amounting to hundreds of millions of euros.”