Bulgarian insurer Eurohold made public its intention on Thursday (26 October) to sue Romania to the tune of €500 million if the case of the “hostile takeover” of Euroins, its Romanian unit, is not solved to the satisfaction of the Bulgarian side.
According to a press release, Eurohold Bulgaria AD and Euroins Insurance Group AD (EIG) officially informed the Romanian government of their intention to start an international arbitration to protect the group’s investment in Romania, unless the dispute over Euroins Romania is remedied quickly and the damages caused to the group are duly compensated.
Kiril Boshov, CEO of Eurohold, the mother company of Euroins, told Euractiv that the claim would amount to at least €500 million.
The holding has already sent a notice of dispute to the Romanian government, which is the first formal step before initiating an international investment arbitration under the investment treaty for the protection of investments, signed between the governments of Bulgaria and Romania.
Moreover, Bulgarian Prime Minister Nikolay Denkov told Euractiv in an exclusive interview on Wednesday that he had raised the question with his Romanian counterpart Marcel Ciolacu, insisting that the Bulgarian company be treated in full respect of the EU legislation.
As the business case becomes political, it also marks what appears to be the first major tension between Bulgaria and Romania since they both joined the EU in 2007.
Both Denkov and Ciolacu are attending an EU summit in Brussels on Thursday and Friday, mostly dedicated to the Middle East crisis and the war in Ukraine.
Eurohold and EIG said they were pushed to take legal recourse following the decision by the Romanian financial regulator ASF on 17 March to withdraw the license of Euroins Romania, the largest car insurer in Romania. Eurohold described the move as nothing short of a “hostile takeover”.
The Romanian regulator made its decision based on a solvency analysis of EIG, which was reportedly showing a solvency capital requirement deficit of more than €400 million and a capital requirement minimum deficit of over €250 million.
Romanian online news website Libertatea reported in March that “the hundreds of millions of euros that are missing will be paid by the state – in fact, by the insured”.
Eurohold denied having solvency problems. The Bulgarian financial control commission KFN told Euractiv in March that a supervision carried out by the KFN had found no problems with the solvency.
The Bulgarian holding said that the acts of the Romanian authority represent breaches of EU legislation, particularly the Solvency II regime, which sets out requirements applicable to insurance and reinsurance companies in the EU with the aim of ensuring the adequate protection of policyholders and beneficiaries.
Speculation in Bulgaria is ripe that the possible motivation to evict the Bulgarian insurer from Romania was in order to make room for a new player on the market, but there has been no official confirmation.
[Edited by Zoran Radosavljevic]