Cypriot Insurance Company’s Failure Rattles Bulgaria’s Government

(AP Photo/Petros Karadjias)

The liquidation of Cyprus’ Olympic Insurance, leaving 200,000 Bulgarians without coverage, now has led to squabbling over who was responsible and why there wasn’t more oversight of the sector and the company.

The policy holders no longer have third-party car liability policies and can be fined by the traffic police if they are caught driving their cars without having purchased other coverage, said EURACTIV in a piece about the dilemma.

Many Bulgarians had been lured to the Cypriot government with offers of low premiums compared to companies in their country, giving Olympic Insurance about 10 percent of the market there, compared to only 0.5 percent in Cyprus.

Cyprus’ insurance regulator, accused of ignoring warning signs about the company, on Aug. 10 named a provisional liquidator for Olympic Insurance after revoking the company’s insurance license for failing to meet minimum capital requirements.

Bulgaria’s Financial Supervision Commission (KFN) blasted the deputy chief in charge of supervision of the insurance business, Ralitsa Agayn, who quit after being blamed for not recognizing problems with the company.

Bulgarian President Rumen Radev said there was a “crisis of statehood” and blamed the government of political foe Boyko Borissov whom he accused of not doing enough to protect Bulgarian citizens and a breakdown with the country’s Commercial Register which records and holds information about all of the country’s companies and non-profit legal entities.

“We have a scandal in the insurance sectors, which basically reveals that there is no oversight”, Radev said, as quoted by the daily Dnevnik.

Bulgaria said that Cyprus should pick up the costs of 28.5 million euros ($32.96 million) in claims by Bulgarian customers of Cyprus’ Olympic Insurance, which went bust and its offices in both countries liquidated.

There were some 9,500 unpaid claims in Bulgaria and 2,500 in Cyprus of some 15 million euros ($17.35 million) the Chinese news agency Xinhua said earlier, with Cypriot Financial Ombudsman Pavlos Ioannou saying he was considering asking his government to propose legislation to help the customers.

Olympic Insurance was based in Cyprus but most of its business was done in Bulgaria, where it had 9 percent of the market with 200,000 insured clients against damage to third parties who were left without coverage and had to purchase new policies from other companies.

The Cyprus Mail published documents it said proved that the failure of the company could have been avoided if Cyprus’ supervisor of insurance companies was more diligent and spotted warnings about its owners shadowy activities with no report of where the monies paid by customers had gone.

The owner of Olympic’s Luxembourg based parent company, a Spanish citizen, was named in a June 2015 statement issued by Spain’s Comision Nacional del Mercado de Valores (CNMV), which supervises the country’s financial markets and warned investors his New York Securities Bank based in the Comoros Islands was not authorized to provide services detailed in Spain’s Securities Market Act, which include insurance services.

Yet, seven months later the Cypriot supervisor failed to heed the warning and he was allowed to buy all shares of Olympic Insurance, totaling almost 8 million, from its previous owner and become its new owner and manager, in January 2016.

An audit could not verify any of several claims about the company’s finances, including Brazilian sovereign bonds, immovable property, receivables and cash deposits in a shadowy bank in the Comoros islands which appeared to be his personal account.

Cypriot Auditor General Odysseas Michaelides said via Twitter that his office had spotted Olympic’s shortcomings when it carried out its audit for 2014 but didn’t explain why, if so, it was allowed to keep operating.