The Bulgarians from Euroins accuse that the searches in Romania coincide with a new trial opened in Washington: The total compensations requested from the state now exceed one billion euros

The Bulgarian group Eurohold reacted on Wednesday to the raids against the former employees of Euroins Romania, in a criminal case aimed at the bankruptcy of the former RCA leader, specifying that the action coincides with a new trial started against the Romanian state at the Court in Washington, where it requests new compensation of 575 million euros.

“Today's searches against the former employees of Euroins Romania (EIRO) coincide with the moment when Eurohold Bulgaria AD (Eurohold) and Euroins Insurance Group AD (EIG) filed a second international arbitration action against the Romanian state at the International Center for the Settlement of Investment Disputes (ICSID) in Washington.

The amount of compensation requested from the Romanian state through this new request amounts to 575 million euros, and in addition, other entities that have suffered losses have joined the case for future procedures,” the Bulgarian group announced in a press release.

Exactly one month ago, the Bulgarian group says, the International Center for the Settlement of Investment Disputes (ICSID / ICSID Center) in Washington rejected the Romanian government's request to terminate the arbitration proceedings initiated by Eurohold Bulgaria AD (Eurohold) and Euroins Insurance Group AD (EIG) regarding the revocation of Euroins Romania's license and the declaration of its insolvency by the Romanian authorities.

With the two arbitration proceedings filed in Washington, the total value of the compensations requested to the Romanian state now exceeds 1 billion euros, the release states.

The Bulgarians accuse the ASF of illegally revoking the Euroins license

“Almost three years after the illegal revocation of the EIRO license, organized by a group of senior officials within the ASF, which led to the bankruptcy of the Romanian insurer, irrefutable evidence, facts and figures have been gathered that this act of the Romanian regulatory authority violated the law and that Euroins Romania was fully solvent on the date of the withdrawal of the operating license (March 17, 2023).

Moreover, all the speculative predictions regarding the huge damages and costs that Euroins Romania should pay in insurance claims have been proven to be manipulative, which further confirms that ЕIRO was solvent and well capitalized at the time its license was revoked, in violation of a number of laws and regulations,” claims Eurohold.

The Bulgarian group claims that “this finding was confirmed in early 2023 by the report of the independent professional actuary hired by the shareholders and the EBRD (a shareholder of Euroins Insurance Group) to carry out an independent technical assessment of EIRO before the date on which EIRO's license was revoked”.

Any “evidence” that could be found three years later would not be accepted by any court

The Bulgarians also accuse that the searches carried out on Wednesday would be “a completely meaningless act from a legal point of view”.

“Any 'evidence' that could be found three years later in the private homes of Romanian citizens who worked as regular employees of Euroins Romania would not be accepted by any court,” claims the Eurohold group.

Searches in the case of the bankruptcy of Euroins. What do the prosecutors accuse?

On Wednesday, the prosecutors made 14 house searches in Bucharest and Târgu Mures, in a criminal case concerning the bankruptcy of the Euroins insurance company. Former heads of Euroins Romania SA are targeted, as well as several companies related to the company's Bulgarian shareholders, the Public Ministry announces. The damage is over 4.6 million euros and over 1.6 billion lei.

“The research showed that, during the period 2020 – 2023, the decision-making factors at the level of the Bulgarian management (with a major decision-making role) of an insurance company, as scriptural/factual administrators of the company and with the support of some persons from the upper management/executive level, would have acted constantly, in the exercise of the same criminal resolution, to decapitalize the company in question, drastically reducing the cash availability and the patrimony at its disposal”, the Romanian Police transmitted.

The accusations in the file are embezzlement with particularly serious consequences, fraudulent management with particularly serious consequences, money laundering and the presentation, in bad faith, of untrue data on the economic or legal conditions of the company or the concealment, in bad faith, in whole or in part, of such data.

The searches take place at 10 individuals who held executive management positions within Euroins, as well as the premises of legal entities under the control of the company's Bulgarian shareholders.

The scheme by which Euroins was prejudiced

Criminal investigations focus on activity carried out between 2017-2023. Prosecutors say Euroins collected large sums from clients, but they were diverted to affiliated companies of the Bulgarian shareholder group, instead of being used to pay the compensation owed.

The decision-makers at the level of the Bulgarian management of Euroins SA, together with people from the Romanian management and affiliated entities, are accused of having “created, conceived, applied and coordinated various mechanisms to defraud the company's financial resources”.

The investigators also describe a criminal mechanism through which the company Euroins Romania was systematically decapitalized by its Bulgarian shareholders (CAM and BKI). Prosecutors say Euroins collected significant sums from clients, but they were diverted to entities controlled by Bulgarian shareholders, instead of being used for client obligations.

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The investigators also talk about the transmission of false reports to the ASF, which created the impression that the obligations towards the insured were covered.

The injured parties have to recover almost 800 million euros from Euroins

In September, the judicial liquidator CITR also sent to HotNews.ro the up-to-date situation of the sums requested from the credit table by the Euroins victims.

“The claims registered against Euroins are not finally quantified, as the Insured's Guarantee Fund (FGA) is still managing claims for compensation. According to the updated table of claims, they currently amount to 2,657,934,575.26 lei pure and simple claims respectively 1,338,834,002.58 lei potential claims, under condition. The institution called to it is the court that decides on the findings of the judicial liquidator, which is also vested with the bankruptcy procedure”, Alina Popa, legal director at CITR, told HotNews.ro.

The causes of the Euroins bankruptcy – CITR's conclusions

On April 5, 2024, CITR presented the report on the causes of the Euroins bankruptcy and the situation of the sums requested by the injured parties at that time.

• “Euroins went bankrupt due to non-fulfillment of solvency indicators.
• The reasons why this imbalance existed are multiple, among which we mention: the structure of the insurance portfolio focused on RCA – 95.52%, while the market average was 54%, the volume of premiums subscribed to RCA increased from 1 billion lei in 2017 to 2.65 billion lei in 2022 and decapitalization through faulty management of funds”, said Alina Popa, the coordinator of the CITR team that manages the bankruptcy. Euroins.

The main causes of the Euroins bankruptcy, according to the judicial liquidator:

• Non-fulfillment of solvency indicators: The company's own funds to cover potential liabilities to all policyholders and reinsurers were insufficient. On 30.09.2022, the own funds needed to cover the SCR were in the amount of 2.2 billion lei and those needed to cover the MCR were in the amount of almost 1.8 billion lei.
• The claims reserves were below the adequate level to cover the potential claims of the policyholdersa result that also emerges as a result of specific tests drawn up by Euroins. As a result of the inventory of the damage files and the litigation files regarding the claimed damages, the judicial liquidator found a difference of 1 billion lei between the existing records at the date of the opening of the bankruptcy procedure and the result of the inventory, from approximately 600 million lei to 1.7 billion lei.
• Failure to pay damages on time: led to the exponential increase in the risk of triggering forced execution procedures, which led to the reduction of the company's patrimony through the accumulation of additional expenses compared to the damages to be paid. Only the amounts in the form of penalties are over 300 million lei, to which are also added the costs of execution;
• Lack of steps regarding the recovery of receivables and loans granted.
• The inefficiency of the recovery of receivables from recourses: on December 31, 2022, according to the company's accounting records, there were unrecovered amounts of 15.5 million lei. To these are added unrecovered sums from the category of miscellaneous debtors of almost 60 million lei;
• Conclusion of the contract with EIG Re through which financial assets were transferred from the company consisting of securities, receivables to be recovered from reinsurance and availability in accounts, in a total value of over 1.5 billion lei, a contract that is submitted for analysis by the syndic judge;
• Losses resulting from making placements: for the period 2019-2023, CITR centralized their value, which amounts to 18.3 million lei;
• Constant losses registered at the level of insurance activity, on different classes of insurance, reaching the maximum in 2022, when losses of 917.6 million lei were recorded for RCA.

CITR says that it has also identified facts that fall under article 268 of the Insolvency Law for which the syndic judge can order that the damage be borne by the members of the management and/or supervisory bodies within the company, as well as by any other person who contributed to the insolvency of the debtor by committing one of the acts expressly provided for by the law.