The €10 million that the insurance company has not deposited in Cyprus, the incompetent supervisory authorities, and the sale of Prime Cyprus by Dimitris Kontominas through corporate bonds.
A systemic risk to the market is the Prime Insurance Group of Mr Dimitris Kontominas, which has a head office in Cyprus and a branch in Greece and faces a solvency problem.
The Cyprus Supervisory Authority seems unable to deal with the case substantially while it has been headless since last summer as the Registrar retired and was not replaced, while the Bank of Greece’s Insurance Supervision Department appears to be handling the case from a long time. It is supposed that by September they should have invested 10m euros in capital aid to Cypriot Prime but this did not happen while the company has an unacceptable solvency ratio.
In a desperate attempt to rescue the Cypriot parent company is trying to sell the portfolio of the Prime Insurance branch in Greece. There have been discussions with both Hellas Direct and Eurolife but to no avail so far as the requirements were considered excessive. But the issue for Cyprus Prime Insurance is not so much the solvency ratios but the poor quality of assets.
The poor quality of assets has been identified by the Cyprus Supervisory Authority since last December (without actually intervening) in a twelve-page letter to the Prime Board of Directors devoting 4 full pages to the short-term intraday intra-group transactions. Transactions that have taken place in recent years and liquidated the liquidity that reached 100 million euros by covering the holes of other companies of Dimitris Kontomina and his personal needs.
Mr. Kontomina’s achievements include:
1. Created in Greece My Direct, which operates as a Prime agent by providing insurance products online. However, My Direct is not a wholly-owned subsidiary of Prime but a short-term interest company and did not pay the premiums you received by selling as Prime brokerage.
2. Prime bought a company from Mr Dimitris Kontominas, which had the sole asset of the businessman’s boat, paying 4m euros to repay the overdue loan to BNP Paribas.
3. Prime purchased a corporate bond from Imtarmatal, which had as its sole asset an apartment of significant value in Paris. The bond was not repaid as a result of attempting to liquidate the apartment but it was found that the apartment had liabilities from another loan which had to be repaid.
In general, Mr Kontominas applied the policy of buying corporate bonds, companies of his own interests from Prime, thereby squeezing out liquidity from the Cyprus Insurance Company and destroying the quality of its assets. The Anastasiadis government seems to have a huge responsibility for the situation that has emerged, beyond the Cyprus supervisory authority, as the responsible Minister does not understand and at the same time does not proceed with the unification of the supervisory authorities which is a European direction.
The Anastasiadis government is currently trying to enact a law consolidating the control of insurance companies with that of insurance funds, but it is also in the air because of opposition reactions. The problem, of course, is that the incompetence of the Cypriot authorities and the indifference of the relevant BoG control department left in the Community passport can cause damage to Greek insureds and the Greek insurance market in which significant steps have been taken in recent years to enhance its credibility.