More insurance companies to go under spotlight
A new round of license revocations is about to begin in the insurance sector, with at least three companies being threatened, sources say. The issue of capital adequacy is returning, as the end of June is the deadline for the second and final installment for companies’ reserves. Although the total amount of 30 million euros that companies have to pay by month’s end is far smaller than the original deficit of 350 million euros that checks found, sources suggest that revoking licenses could be repeated if any companies fail to cover their liabilities. In the first phase of the monitoring, insurance company Astra had its license revoked, after confirmation that it was repeatedly inconsistent toward its clients and did not pay the compensations required. The same sources reveal that at this stage the threat does not stretch to the whole of the market. It only concerns specific insurance firms whose names have engaged authorities in the recent past, too, and are showing no signs of compliance. Checks were based on adequacy tests, a method used for the first time by the competent department of the Development Ministry, revealing the tragic picture of inadequate reserves in the car insurance sector. Another major problem is in the life insurance sector, which has not been checked for two consecutive financial years, as the competent department of the ministry focused its efforts on the car insurance sector instead. Checks on the life sector are expected to start in August, provided the ministry’s tender to find a consultant has been successful. Monitoring will concern the 2005 financial year, covering all insurance companies and all sectors. If it goes as planned, this will be the most extensive monitoring ever, both in company liabilities and in requirements, through on-the-spot checks by groups of specialized inspectors. In this context and along the effort to standardize a specific method certifying the adequacy of reserves of life sector insurers, the ministry has proclaimed a tender for the hiring of a specialized actuarial firm, which will propose a specific procedure.