The Insurance Regulatory Unit and some creditor sector companies are expected to request to open bankruptcy proceeding against at least 4 insurance companies, to guarantee the rights of creditors, policyholders and shareholders, noting that the bankruptcy of insurance companies may be subject to increase.
The sources revealed that according to the “Insurance Regulation” and “Bankruptcy” laws, their executive regulations and their amendments, each of the supervisory authority represented by the insurance unit and the company’s creditors — creditor insurance companies and others — has the right to request opening settlement procedures, preventive restructuring or declaring bankruptcy.
The sources indicated that the decision issued by the insurance unit at the end of last week regulated the method of calculating the minimum value of the application for opening settlement procedures, preventive restructuring or declaring bankruptcy in the insurance market.
The decision stipulates that the minimum order for opening preventive settlement procedures, restructuring or bankruptcy for insurance and/or reinsurance companies is calculated according to two equations:
1 – Equity value (according to the latest interim revision or audited annual financial statements submitted to the unit or when there is any change therein x Fixed ratio equal to 5%
2 – The value of the paid-up capital (according to the latest audited or audited annual financial statements submitted to the unit or whenever there is any change in it x a fixed percentage equal to 5%
The sources pointed out that the companies expected to apply for bankruptcy procedures have over the past years burned the prices of insurance policies and refrained from implementing judicial rulings to compensate policy holders.
The sources said out that the unit is studying the opening of bankruptcy procedures for some companies that refuse to pay their due refunds to associate companies, after these harmful practices in the sector caused severe damage.
The sources explained that the refunds are divided into two parts: the first is participation in the insurance premiums related to the borders, as according to the agreement concluded between these companies, some companies undertake the tasks of receiving these premiums and handing them over to the company issuing the document, which is what some companies in the sector are reluctant to fulfill.
The second section is the compensation resulting from a policy against third parties, where the insurance company resolves on behalf of the insured in the event of an accident and pays the compensation resulting from the accident and then returns to recover these amounts from the other insurance company, if its client is the cause of the accident, note that there are many Companies that used to issue this document at cheap prices and did not commit to paying claims to associate companies, which led to the aggravation of the phenomenon and the accumulation of amounts to astronomical figures (in millions).
The sources estimated the total value of recoveries owed to companies by associate companies at more than 50 million dinars, which is large amounts compared to the size of the local insurance market and the value of written premiums.
It is noteworthy that the unit had issued decisions last week to stop many insurance and brokerage companies from practicing the activity, and warned them against referring them to the Public Prosecution in case the activity is practiced without a license.
This came after the expiry of the deadline granted to licensed persons from insurance companies and practitioners to reconcile their conditions with the provisions of the Insurance Regulation Law and its Executive Regulations, a matter in which many companies failed and prompted them to stop practicing the activity.