Romanian insurance and reinsurance undertaking ASTRA SA deemed insolvent by the FSA

According to the FSA, on 30 June 2015, ASTRA SA had: (i) a negative available solvency margin of approximately RON 871 million (approximately EUR 197 million), (ii) a liquidity ratio of 0.03, and (iii) a capital shortage of approximately RON 968 million (approximately EUR 220 million).

KPMG Advisory’s report reveals that ASTRA SA met the legally required conditions for insolvency: (i) obvious incapacity to pay due debts with available monetary resources; (ii) decrease of the available solvency margin below half the minimum threshold for the safety fund; and (iii) impossibility to recover financially within the financial recovery proceedings.

The FSA Board decided to: (i) close ASTRA SA’s financial recovery proceedings; (ii) revoke KPMG Advisory as special administrator; (iii) withdraw ASTRA SA licence to operate; and (iv) ascertaining the insolvency of ASTRA SA and initiate bankruptcy procedures.

The FSA Board concluded that the financial recovery proceedings failed to reach their main goal, namely the avoidance of ASTRA SA’s bankruptcy.

The FSA further stated that in the coming weeks, it will take actions to protect the rights of ASTRA SA’s clients and also to maintain the stability of the insurance market in Romania.

In a recent article we highlighted the main features of the new law regulating the Romanian Insurance Guarantee Fund (“IGF”), intended to protect insureds, beneficiaries, and third parties. The IGF guarantees the payment of indemnities and damages derived from voluntary and mandatory insurance policies if an insurance undertaking becomes bankrupt. One of the most important changes brought by the new law was the limit of payments by the IGF for insurance claims to RON 450,000 (approximately EUR 101,000) per insurance creditor of the bankrupt insurance company. Payments will only be made for insurance claims that are certain, liquid and due and will made be in the Romanian national currency (RON).

Our insurance team will be available for further details in this issue considering that ASTRA SA was one of the leading insurance undertakings in Romania and had relationships, including reinsurance arrangements, with various international institutions.