Dick Roche’s recent commentary ‘Preaching transparency but not practicing it” prompted many reactions, but none from the institution in focus: the European Insurance and Occupational Pensions Authority (EIOPA). The author comes back with 10 questions concerning its handling of the Euroins case in Romania.

Dick Roche is a former European Affairs Minister of Ireland, now a consultant for Eurohold.

Romania is something of a Bermuda triangle for insurance providers. Thirteen insurance providers have been forced out of business in as many years.

Companies providing motor insurance (MTPL) have been particularly badly hit. In 2015 Astra, Romania’s oldest retail insurer business closed its doors. In 2017 Carpatica a growing MTPL provider, went out of business.  In 2021 City Insurance with more than 3.5m MTPL clients went bankrupt.

In 2019 when City Insurance was in difficulties Bulgaria’s company Euroins (Euroins Romania) was asked by the Romanian regulator, ASF, to take over the company.  The ‘request’ to buy City Insurance was not a benign one.

Euroins refused to comply with the ASF ‘request’ and trouble followed. For almost four years, ASF mounted an unrelenting campaign against Euroins Romania.

The campaign reached its climax on 2 February 2023, when in a bombshell report ASF alleged Euroins had breached its solvency capital requirement and minimum capital requirement.

Shortfalls of €400 million and €320 million respectively were alleged and Euroins reinsurance arrangements were also red-flagged. None of these concerns featured in three ASF reviews issued between 2020 and 2022.

On 17 March 2023, ASF withdrew the Euroins Romania’s operating licence.

That action added to the troubles in Romania’s insurance sector, impacted the insurance cover of millions of Romanians, opened the way to a €500 million-plus lawsuit against Romania, and fuelled speculation that ASF was acting to make room for a new ‘player’ in the Romanian insurance market.

When ASF released its ‘bombshell’ report, the owners of Euroins Romania turned to EIOPA for help. Euroins proposed that internationally recognised actuarial and accounting experts be appointed to carry out an independent review of  Euroins Romania under the supervision of EIOPA.

The European Bank for Reconstruction and Development [EBRD] also approached EIOPA.

EBRD questioned the ASF assertions about Euroins Romania. It supported the call for an independent external external review.

The Bulgarian regulator FSC also flagged concerns to EIOPA.

However, the request for an independent review fell on deaf ears.

Euroins was not invited to participate in, submit material to, or make any input to the review. In contrast, ASF was aware of and involved in the EIOPA report from the outset.

When EIOPA’s report was completed on 28 March 2023 it was immediately shared with ASF but was not made available to Euroins.

The report has been withheld from the European Parliament, to which EIOPA is supposed to be answerable It has not been published.

Parliamentary questions (PQ) tabled by MEPs on the Euroins case have received derisory, dismissive, and in some cases inaccurate responses. Material referenced in PQ replies as supporting the report has, in the main, been either substantially redacted or ‘access denied’.

The Commission played hand in hand with EIOPA. In addition to evasive answers to straightforward questions, the Commission has referenced links that should – but do not – help MEPs in their efforts to establish the facts.

In its answer to a parliamentary question tabled by a German MEP, the Commission provided a link that referred to a heavily redacted version of a Board of Appeal report on the Euroins case from June 2023. Why this was done is hard to understand, as an unredacted version of the report is available on the website of the European Banking Authority.

Paragraph 12 of the unredacted version provides information that EIOPA, by not making its report available, has withheld from the Parliament to which it is supposed to be accountable.

The paragraph reads: “According to the EIOPA Report, Euroins Romania had a deficiency of the net best estimate for the MTPL business at the reference date of 30 September 2022. In EIOPA’s view, the deficiency was in the range between €550 million and €581 million.”

This conclusion differs dramatically from the conclusions of ASF in its three reports for 2020, 2021, and 2022, none of which found reported deficiencies. It even differs from the damning ASF statement of February 2023 which alleged shortfalls of €400 million and €320 million respectively.

The EIOPA conclusion differs even more dramatically from an examination of Euroins commissioned by the European Bank for Reconstruction and Development. That report concluded that from a quantitative perspective, Euroins was solvent and that from a qualitative perspective Euroins reinsurance contracts met the requirements of Solvency II for risk transfer.

Many questions arise from the way that EIOPA has conducted itself in this case. Here are just a few:-

Why did EIOPA not agree to the proposal that independent experts be engaged to carry out a review under its supervision?

Why did EIOPA decide to exclude Euroins from the preparation of its report?

Why, as noted in the report of the Board of Appeal, did EIOPA decide not to disclose its report to Euroins?

Where were the experts who participated in the drafting of the report drawn from?

How were the independence and the impartiality of those experts involved ensured?

Where did the data used in EIOPA’s report come from and was there any independent verification of the overall integrity of the data provided to EIOPA?

Did ASF provide any data? If so what proportion of the data used in the report were drawn from that source?

Were any aspects or results of the Report communicated to ASF before the revocation of the license of Euroins by ASF on 17 March 2023?

Did EIOPA approve ASF to use material from its report in the Bulgarian courts when Euroins, engaged in the same court action, was being denied access to the report? If so, how does EIOPA justify such action?

One further question can be added:

Can EIOPA explain its failure to support a resolution proposal put forward in April 2023 by Euroins and the EBRD? That proposal aimed at mitigating the social and economic impacts of the course of action taken by ASF, an objective very much within EIOPA’s remit.

It would be interesting to hear why EIOPA brushed the idea aside.