ECONOMY

Insurance firms let off easy by State

The Ministry of Development’s audit of insurance firms’ finances for the year 2001 ended this week and the first indications are that this audit was as lenient as they come. Contrary to earlier expectations, the government will neither force companies to close by withdrawing their operating licenses, nor will it impose fines for their failure to pay customers. The reason for this leniency is the drubbing these companies have faced on the Athens Stock Exchange, where the sectoral sub-index has fallen more than 63 percent since the beginning of the year. A prime example of that leniency is in respect to road assistance company Express Service. The company had been forced to close on October 2001, but the government allowed it to reopen until the Council of State, the country’s highest administrative court, decided on its fate. The ministry finally came up with a solution aimed at keeping the company alive: In an extraordinary shareholders’ meeting on September 17, Express Service amended its charter to become a trade firm. This procedure, envisaged by a new law on insurance firms, was allowed as soon as the company had paid all its debts to customers. This solution may follow the letter of the law, but market experts questioned the wisdom of allowing a company in such dire financial straits as to contemplate liquidation to change its activity. The switch also allowed the company to recover assets worth 1.5 million euros, as well as its fleet of cars. The company’s amended charter is not strong on specifics but excludes insurance activities. The audit took at face value both the insurance companies’ equity capital increases and the implementation of merger and acquisition plans, if any. The supervision of the sector will continue to be light in 2002, if acceptance of certain of the insurers’ demands regarding insurance for small town properties and those in areas not covered by town planning is any indicator. Including these properties would create extra value for big firms, such as Ethniki Insurance, Interamerican, Aspis Insurance and European Reliance. On the other hand, the government is reluctant to accept the companies’ proposed method for evaluating their stock portfolios, as well as the way they price their premiums.