Insurance sector crisis downplayed

Development Minister Akis Tsochadzopoulos yesterday appeared confident about the prospects of the insurance market and sought to downplay fears about companies’ liquidity problems. Asked about the collapse in the value of the firms’ stock portfolios, which is partly to blame for their present financial difficulties, Tsochadzopoulos said this is a problem that will be reversed with the recovery of the Greek and international stock markets. The Athens bourse has been on a downward spiral since mid-September 1999, and has lost over 20 percent this year alone. However, listed insurance firms have done much worse this year: The insurance sectoral index has lost over 72 percent. Tsochadzopoulos said that a new law on the insurance market would help the sector. He declined to reply, however, to persistent questioning over whether he would force insolvent companies to close by taking away their operating licenses. Tsochadzopoulos made his statements following a meeting of a committee of 10 legal experts, led by Professor Michalis Stathopoulos, a former justice minister. Tsochadzopoulos has appointed the committee to advise him on revamping the law governing the insurance market; he said the existing legal framework is «outdated.» The committee has been asked to propose a more effective monitoring system of the insurance sector. It is expected that the Bank of Greece will play a significant role in this new setup, since insurance companies are now conducting many financial transactions. Tsochadzopoulos did not provide details about the ways in which the oversight process will change, but he said he was considering the option of an independent authority. At present, it is officials from the Development Ministry who monitor the sector. The minister said that the oversight of insurances, banks and financial markets had many aspects in common and added that an «integrated approach» was needed. The committee of experts is expected to submit its recommendations early next year. The insurance market includes several companies very close to insolvency. Despite this well-known fact, only one was forced to shut down its operations. In the present financial climate, even the biggest companies are facing severe liquidity problems and are finding it difficult to attract new clients.