The Cypriot insurance company Olympic has declared bankruptcy and no longer holds an insurance license. Its branch in Bulgaria has also declared bankruptcy. In fact, it is not clear which of the two acts took place first, because the main business of the Cypriot insurer was concentrated in Bulgaria. Anyway, the result was that 200,000 Bulgarian cars no longer have valid third-party insurance. Many companies have incurred losses too including state-run ones who have had contracts with the Cypriot company.

Under the law in Bulgaria, all insurers in the country are monitored and controlled directly by the independent Financial Supervision Commission (FSC) elected by parliament. This Commission though is not empowered to carry out surveillance on branches of foreign insurers from countries of the European Union, because their parent companies are based in other European countries where they are controlled by local regulatory bodies. Apart from not being subject to control, neither a license nor permit is required for opening such branches in this country. It is enough if the parent company informs FSC of its intent to do so. All this implies that there is a long way to go until the insured by Olympic will be able to receive indemnities from the Cypriot warranty fund, because we are still to see the ruling of the court of justice in Limassol for the liquidation of Olympic that should be followed by the transfer of money to the warranty fund in Bulgaria. In the meantime, the affected should urgently contract and pay for third-party insurance with another company.

The collapse of the Cypriot insurer in Bulgaria has triggered reactions and rows unprecedented for an event of this scale. At a certain point the row even surpassed panic surrounding the bankruptcy of the fourth largest Bulgarian bank, Corporate Commercial Bank in 2014. Outcry was so strong that in the middle of its summer recess the parliament was convened overnight for an extraordinary session at the request of the opposition Bulgarian Socialist Party, as agents of the State Agency for National Security (SANS) and officials from the Prosecutor’s Office entered the FSC for an investigation into the case. They are expected to find out to what an extent FSC has kept an eye on the Cypriot insurer, what measures it took to stabilize its financial condition and what it did to protect the troubled company’s customers.

In this situation Prime Minister Boyko Borissov said that the government would provide assistance for handling the case without however making any financial commitments. The premier urged parliament to dismiss from FSC its deputy chairperson in charge of insurance companies, Ralitsa Agayn, as well as to form a working group focused on ways to compensate the Bulgarian drivers affected by the bankruptcy of Olympic. Ralitsa Agayn resigned by herself and her resignation was accepted by the National Assembly. Foreign Minister Ekaterina Zaharieva met for talks with the ambassador of Cyprus to Bulgaria and demanded an urgent meeting of Bulgarian and Cypriot experts who would find a way out of the financial and insurance deadlock.

Who is to blame for the collapse of the Cypriot insurer is still difficult to say. There are speculations about unclear phantom owners of Olympic who according to rumors could be figureheads of a Bulgarian insurance company. Others speculate that the official owner of Olympic, a Spanish national, anticipating the failure of his plans moved from Cyprus to the United Kingdom. Some observers and experts have added that the insured persons have also contributed to the bankruptcy of the insurer – with being tempted by the low prices offered by Olympic and by failing to measure the risks of a policy of low pricing.

The Bulgarian authorities believe that their helplessness in the case with Olympic stems mostly from the imperfect Bulgarian and European law in the field of insurance. For this reason officials have hinted that the issue of introducing changes to the European directives and to the Bulgarian Insurance Code will soon be put for discussion.

English Daniela Konstantinova