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The return of Euroins Romania's license will save Romanian taxpayers €1 billion in losses and allow the parent company - Euroins Insurance Group AD (EIG) to continue supporting the company's development.

This was announced by the management of Eurohold Bulgaria AD at a press conference in Bucharest late yesterday evening.

The press conference was organized in connection with the decision of the Romanian financial regulator ASF on March 17 to revoke the license and open bankruptcy proceedings of Euroins Romania, appointing the Guarantee Fund (FGA) as the company's temporary administrator.

It was attended by Asen Hristov and Kiril Boshov, respectively chairman of the supervisory and management board of Eurohold, as well as Tania Blatnik, executive director of Euroins Romania.

In a presentation (attached below and HERE), specific data and facts were shown that confirm the financial stability and solvency of Euroins Romania, as well as a complete chronology of the events surrounding the case with the reinsurance contracts.

New revelations were also made about the persons who have an interest in destabilizing the company and the Romanian insurance market as a whole, 

The head of "Eurohold" after the revoked license from Romania: We will make claims for tens, if not hundreds of millions!

The two alternatives to Romanian supervision

"The ASF has two options - to confirm its decision of March 17, which will bring direct damages and losses to Romanian taxpayers of nearly 1 billion euros, or to ask the court to overturn this decision and return the license to Euroins Romania, which will save these damages and losses, and EIG will be able to continue supporting the development of the company," Asen Hristov pointed out.

So far, the group has invested around EUR 280 million in the Romanian insurer in the form of a capital increase.

It is the decision of the ASF to withdraw the license and ask the court to start a bankruptcy procedure for Euroins Romania, which will be the reason for the termination of all reinsurance contracts of the Romanian company, as a result of which all damages and claims will have to be paid by the Guarantee Fund, Eurohold's management also warned, recalling that this condition is basic and standard for every reinsurance contract.

As of the date of revocation of the license, the Romanian company regularly and on time fulfills its obligations and at any moment provides full coverage of both the minimum capital requirement (MCR) and the solvency capital requirement (SCR) - the two key indicators for any insurer.

The coverage of both indicators is guaranteed both under the terms of the company's previous reinsurance contracts, unrecognized by the Romanian supervision, and under the new reinsurance contract with EIG Re EAD, the reinsurer of the Eurohold insurance group, which, although perfect from a legal and economic point of view, was also not accepted by the regulator in Bucharest.

"If we look at the facts and data, it seems that the ASF board was seriously misled by a false and untrue report, which could bring a loss of nearly 1 billion euros to the Romanian taxpayer," warned Asen Hristov.

As a confirmation of the good financial stability and solvency of Euroins Romania, the management of the holding also highlighted the statements of the representatives of ASF to the Romanian media.

On March 18, ASF spokesperson Daniel Apostol stated (to jurnalul.ro) that "the withdrawal of the authorization of the Romanian insurer is not related to economic reasons, but is a sanction for behavior".

ASF Vice-President Christian Roshu confirmed a similar thesis on the same date, saying (to profit.ro) that as of the date of license revocation (March 17), the company was servicing all of its current claims-related obligations,

The reinsurance contract with EIG Re

The management of Eurohold also revealed another new important detail - the reinsurance contract of Euroins Romania with EIG Re has been officially confirmed by the regulator, which is the only competent and in a position to make a decision - the Bulgarian Financial Supervisory Commission (FCS).

The Sofia-based reinsurer is under the direct control of the Bulgarian regulator.

On March 14, the FSC sent a letter officially confirming the solvency of EIG Re and the validity of the contract, respectively.

In this case, the Romanian financial regulator has no right not to recognize this contract as valid.

Otherwise, this would be a direct violation of European (Article 32 of the EU Solvency 2 Directive) and Romanian legislation, as it follows the decision of the Romanian supervisor to ultimately not recognize the reinsurance contract.

The management of Eurohold confirmed the good financial condition of the Romanian insurer at the date of license withdrawal and with more specific data and examples.

As of March 17, Euroins Romania has more than 110 million lei in current assets, including 40 million lei in cash and short-term receivables from insurance brokers and intermediaries for 70 million lei, which must reach the company within 5 days .

At the same time, the daily operating costs of the company are in the order of 5-5.5 million lei, and current liabilities for another 1-1.5 million lei are added to them.

"There can be no question of insolvency of the company under these parameters," Asen Hristov pointed out during the event.

Fulfillment of capital requirements

Contrary to ASF's claims of a capital shortfall of Euroins Romania as of September 30, 2022, Eurohold's data shows the exact opposite.

As of this date, the Romanian insurer actually possesses the necessary permissible basic own funds, which ensure the minimum capital coverage and the capital requirement for solvency in amounts that exceed the 100% required by law.

This is the case both through the prism of the reinsurance contracts with leading reinsurers in Europe, which are not recognized by the financial supervision, which ensure the transfer of 55% of the risk in the company's portfolio, and in relation to the subsequent new reinsurance contract with EIG Re, which transfers outside the company 87 % of risk.

As of September 2022, the CPI is 143%, and as of December 2022 - 134%, and the MCI - 272% and 280%, respectively.

Additional,

the reinsurance contracts of Euroins Romania, not recognized by the Romanian regulator, have been formally confirmed by the same supervisor in the past at least twice in the last three years, including during a significant audit and a large-scale review of insurers' balance sheets in Romania in 2021. They are confirmed by both independent auditors appointed by ASF during the review of the balance sheets.

At some point last year, these contracts became unacceptable to the regulator and the company was forced to terminate them and replace them with new ones.

They are also confirmed by the two independent auditors appointed by ASF during the review of the balance sheets.

At some point last year, these contracts became unacceptable to the regulator and the company was forced to terminate them and replace them with new ones.

They are also confirmed by the two independent auditors appointed by ASF during the review of the balance sheets.

At some point last year, these contracts became unacceptable to the regulator and the company was forced to terminate them and replace them with new ones.

The regulator's February 2 report

The process of replacing the reinsurance contracts begins in mid-2022 and continues with the renewal of the contracts for 2023. This is also the moment because of which the insurance supervisor attacked the company aggressively and found a capital shortage.

The culmination came with a report sent to the company on February 2 this year, which covers the period to the end of September 2022. The regulator refused to look at the data as of December, which shows the company's performance for the whole of 2022. With the report sent on February 2, the Romanian insurance supervisor suspended the existing reinsurance contracts of Euroins Romania with leading AA-rated reinsurers in Europe and charged additional reserves to the insurer in the amount of 605 million lei.

This is also the method,

according to which the ASF found on paper a capital shortfall of 2 billion lei or 400 million euros.

If the existing reinsurance contracts are taken into account, even with the additional reserves of 605 million lei charged by the regulator, the coverage of MKI and KIP would be over 100%, Eurohold's calculations show.

With the conclusion of a new quota reinsurance contract with EIG Re at the beginning of February (with retroactive effect as of January 1), Euroins Romania meets all the requirements of the Romanian insurance supervision, including for advance payment of the premium under the agreement.

The new contract was concluded in accordance with all European standards and norms and is customary for most of Europe's leading insurance groups.

It ensures the transfer of 87% of the risk in the portfolio of Euroins Romania and guarantees the full volume of damages to the Romanian insurer.

Another 10% of the risk remains for the leading reinsurer in Europe and only 3% in the Romanian company itself.

An additional security for Euroins Romania and EIG Re is that a significant part of the risks assumed by the new reinsurer are retroceded to leading European reinsurers.

With the reinsurance contract with EIG Re, Euroins Romania's MKI and KIP coverage jumps to 219% and 148%, respectively, as of January 1, even if the 605 million lei increase in technical reserves prescribed by the Romanian regulator is taken into account.

In this way, the risk and solvency of Euroins Romania are fully guaranteed.

ASF refuses to recognize the reinsurance contract with ridiculous arguments, including claims by insurance supervisors that EIG Re is an unknown, Bulgarian company and does not have the necessary capital.

"EIG Re is a company with over 20 years of history and has more experience than the insurance group itself," Assen Hristov noted on this occasion, recalling that EIG acquired it from the German HDI 8 years ago.

As a result, the Romanian supervisor ruled that Euroins Romania did not meet the capital requirements (MCI and CIP coverage of at least 100%) and on this basis withdrew the company's license and opened bankruptcy proceedings.

Paradoxically, at the same time, the ASF requires the provisional administrator, the Guarantee Fund (FGA), to terminate the reinsurance contract with EIG Re, an action that effectively recognizes this contract.

The consequences for the Romanian market

The illegal actions of the Romanian insurance supervision lead to severe consequences not only for Euroins Romania, but also for the entire Romanian insurance market, Eurohold managers warned.

The direct damages are in the amount of 400 million euros and if the decision to withdraw the license is not withdrawn, these sums must be taken from the Guarantee Fund in the country, fed by the insurers with the premiums paid by the insured persons and largely emptied after the last bankruptcy of the City Insurance company in 2021. This would require government intervention and a transfer from the budget, which is unacceptable from the point of view of European legislation and, among other things, would again be at the expense of Romanian taxpayers.

"Additionally, around 500 million euros may reach the damages for losses suffered, damages suffered and lost profits from unrealized investments, for which we will bring legal claims and which, unfortunately, will have to be paid again by the Romanian taxpayer," further announced by the management of the company.

The negative consequences include the deepening crisis on the insurance market in Romania, the rise in prices but a line of reinsurers who now have to calculate a much higher risk and the damage to the reputation of the Romanian state.

All this brings a sharp jump in the prices of "Civil Liability" insurance, which, even if they are temporarily frozen, would then increase sharply again.

"The only ones who will have to bear responsibility for this damage, harm and loss will be the ASF board members, 

The EBRD supported Euroins in Romania, commissioned an independent report by an international consultant

Eurohold has already referred the problem to all competent and interested state bodies and institutions in Romania and Europe.

As Eurohold announced, apart from Euroins Romania, all other subsidiaries and businesses of the holding in all the other 11 markets in which they operate, including insurance and energy, are operating and will continue to operate as usual and without any problems, serving their customers and obligations and executing their business plans for the year.

During the past month and a half, the management of the holding took all the necessary actions to protect the other companies of the group and to guarantee their stable and normal functioning.

The case with Euroins Romania will in no way affect the activities of the other companies in the group.

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