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154 000 drivers woke up without car insurances in the middle of the year after the Private Insurance Supervisory Committee to the Bank of Greece took the license of Ευρωπαϊκή Πρόνοια. The supervisory authority of insurance companies checked the assets of the company in February this year. It recommended the company to increase its capital, but Ευρωπαϊκή Πρόνοια failed to deal with fundraising. So, the license taking proved to be inevitable.

At the moment, the lawyer Prodromos Sikiaridis from the committee to the Bank of Greece is appointed the supervisor who, according to the Greek edition of Capital GR, will request the appointment of a liquidator. Ευρωπαϊκή Πρόνοια was established in 1995 and currently holds about two percent of the market share of motor insurance in Greece. The problem is that a series of small and not so small insurance companies began to declare bankruptcy one after another in the past two years and to fall out of the insurance market like domino tiles. Aspis Pronia AEGA, Aspis Pronia Zois, Geniki Enosi, Geniki Pisti, Skurtis, Commercial Value and VDV Leben are the insurance companies in Greece that were ruined after the height of the global economic crisis. Most of them showed a great difference between the declared and the actual assets, which cost them their licenses.
 
The liquidation of Ευρωπαϊκή Πρόνοια is expected to burden the mutual fund of insurance companies with around 100 million euros, reported Insurance World. The rescue mechanism was created after the insurance bomb of Aspis Pronia exploded in 2009 and left more than one million victims without health and life insurances. Ευρωπαϊκή Πρόνοια stopped paying benefits, but has no right to accept insurance premiums from its customers. After a month, the policyholders in the company will be compensated from the mutual fund.

In the two months before taking the license of Ευρωπαϊκή Πρόνοια, some policyholders have transferred to other rival companies as a result of the rumours that the company is close to bankruptcy. The problems of the company did not begin yesterday, say sources familiar with the situation. Although Ευρωπαϊκή Πρόνοια had benefited from Article 6 of the law on private insurance companies 400/70, the necessary steps to rescue the company were not taken.

Article 6, popular in the insurance circles, allows the insurance companies in the red to make a second more favourable evaluation of their assets. It allows the companies to increase the tax valuation of their real property by 30%, which should ensure coverage of budget deficits. The last check made at the beginning of the year showed that the deficit of the company was a few million less, which required a serious increase in the capital. The capital, however, was not increased and the operating license has been taken.

It will be very difficult for the mutual fund, which is the rescue mechanism for the insured people, to cover the damage caused by private insurance after the next collapse of the insurance market in Greece. Katemerini announced still in late 2010 that the fund’s deficit was almost one billion euro, which required restructuring of the organization. The first proposal relates to limit the benefits for car insurance to 100,000 euros. The other change is related to ensuring the flow of funds. The insured who resorted to the mutual fund have to insure their car or property at the fund at least two years after the liquidation of the bankrupt company, before withdrawing their contracts.

More information will be submitted later in the day.