Bankruptcy of insurance organizations: features of the procedure

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

When analyzing the fundamentals of the financial activities of insurance organizations, the insolvency (bankruptcy) of these structures is of particular interest.

Relevant issues are related to the grounds for declaring companies insolvent, the procedure and conditions for implementing measures to prevent bankruptcy, the procedures prescribed by law, and other problems that arise in cases of an enterprise's inability to satisfy creditors' claims in full.

In the article we will consider the features of the bankruptcy of insurance companies.

Basics

As a general sign of the insolvency of legal entities, the inability to repay obligations to creditors and the budget within three months from the date when the requirements should have been satisfied.

The key regulations that define the features of the bankruptcy of insurance companies are fixed by Federal Law No. 127.

Preventive measures

To prevent insolvency (bankruptcy) of insurance organizations, the following regulatory instruments are provided:

• Providingfinancial assistance by the founders/participants of the legal entity or other entities.
• Change in the structure of liabilities and assets.
• Increase in share capital.
• Reorganization.
• Other measures not prohibited by law.

Reason for implementation of preventive measures

Measures to prevent the bankruptcy of an insurance company are taken when:

1. Repeated refusal to repay monetary obligations to creditors within a month. Refusal should be understood as non-fulfillment/improper fulfillment of requirements within ten days from the date of occurrence of the relevant obligation, unless otherwise provided by law. Only business days count.
2. Failure to fulfill the obligation to deduct payments to the budget within 10 days (working) from the date of its occurrence.
3. Insufficient funds for the timely repayment of debt (including before the budget), if the deadline for this has come.
4. Repeated violation of the requirements for the structure and composition of assets established by the Ministry of Finance within 12 months. from the date of discovery of the first violation.
5. Revocation, suspension or restriction of the license to operate.

Within 15 days from the date of occurrence of these circumstances, the insurance company must send a notice to the supervisory authority (Central Bank) about this. Attached is a plan to restore solvency. These actions are performed if there are no signs of bankruptcy of the insurance company.

Within 30 days (working days) after receiving the plan, based on the results of its study, the supervisory authority makes a decision on the appointment of a temporary administration in the insurance company or on the inappropriateness of this appointment. In cases stipulated by the resolutions of the Ministry of Finance, he also has the right to decide on an on-site inspection. The verification is carried out in the manner prescribed by the supervisory authority.

Peculiarities of bankruptcy of an insurance company

As a result of the analysis of the plan to restore solvency or the results of an on-site inspection, signs of insolvency may be identified. In such cases, the supervisory authority files an application for bankruptcy of the insurance company (a sample document is presented in the article).

If a legal entity carries out insurance related to the activities of a trade union association of insurers or another organization that is responsible for transferring compensation payments, the manager must send a notification to these structures within a week from the date of the occurrence of grounds for the implementation of measures to prevent bankruptcy. The corresponding provision fixes the 4th part of Art. 184.1 FZ No. 127.

When carrying out the bankruptcy procedure of an insurance company, trade unions bear obligations and exercise the rights provided for by law for financial structures.

Provisional Administration

She is assigned if:

1. The grounds for the implementation of measures to prevent the bankruptcy of an insurance company in the absence ofnotification of the supervisory authority of their presence.
2. A decision was made to implement a plan to restore solvency or establish control over its execution.
3. The legal entity does not fulfill/improperly fulfills the points of the plan.

The supervisory authority must motivate the decision to introduce an interim administration.

Legislative requirements

The decision to introduce a temporary administration is made without fail in cases of revocation, suspension or restriction of the license. The reasons for this are:

1. The conduct of activities by an insurance company that is prohibited by the regulations of the Russian Federation, as well as violating the conditions established for issuing a permit.
2. Failure of the organization to comply with the provisions of the legislation governing insurance activities, in terms of the creation and placement of funds from funds, reserve and own funds, guaranteeing the implementation of compensation payments.
3. Failure of the company to comply with the requirements for ensuring the ratio of the company's own funds and the obligations assumed by it, as well as other requirements related to maintaining solvency and financial stability.
4. Insufficient funds for timely repayment of obligations to creditors and the budget.

The insurance company has the right to challenge the decision taken by the supervisory authority in arbitration or a court of general jurisdiction. However, the appeal process does not suspend the provisional administration.

Signs of bankruptcy

They are established in art. 183.16 of the Federal Law No. 127. The bankruptcy procedure of insurance organizations is initiated if:

1. The total amount of claims declared by creditors for monetary obligations, for the payment of severance pay or wages of citizens who worked (working) under employment contracts, or the total debt to the budget is at least 100 thousand rubles, and these requirements are not completed within two weeks from the date of their execution. At the same time, obligations to employees must be confirmed by judicial acts that have entered into force.
2. The rulings of arbitration or instances of general jurisdiction, according to which ILs (writs of execution) were issued for the enforcement of the decision of the arbitration court on foreclosure on the funds of a financial organization, were not executed. The amount of creditors' claims does not matter.
3. The value of the property/assets of the company is not enough to pay off obligations to creditors and the budget.
4. The activities of the interim administration did not lead to the restoration of solvency.

Sample Insurance Company Bankruptcy Application

The control body indicates in the document:

1. Name of the court to which it is filed.
2. Name of the insurance organization, address, identifying information. The latter include the number of the state registration record in the status of a legal entity, TIN.
3. Name of the control structure and its address.
4. Volume of claims on monetary obligations, amountarrears in contributions to the budget, the value of assets (property) or other information relevant to the proceedings.
5. F. Acting insolvency practitioner, name and address of the self-regulatory structure in which he is a member, or the name of the organization from which he must be approved, its address.
6. List of applications.

The statement of the interim administration contains almost the same information, with the exception of a number of points:

1. Instead of the name of the control body, the full name of the head of the interim administration, the address to which correspondence will be sent, details of the document confirming the approval of the person in this position.
2. The name of the self-regulating structure and its address are indicated if the head of the administration is an arbitration manager.
3. Information about the candidacy of the bankruptcy trustee, if, in accordance with Federal Law No. 127, he is not the Deposit Insurance Agency.

Application Attachments

In addition to the documents, the list of which is fixed by the AIC, the following are attached to the application:

1. Constituent documentation of an insurance company, certificate of state registration in the status of a legal entity.
2. Balance sheet as of the last reporting date or documents replacing it.
3. The decision of the control structure to send an application to arbitration, drawn up by the temporary administration, if the Federal Law No. 127 does not establish that it shouldtake the administration itself.
4. Report on the value of all property of the insurance company, generated by the appraiser (if any).
5. Conclusion on the financial condition of the insurance company, if the application is submitted in accordance with Art. 183.13 of Federal Law No. 127, or a report on the work of the temporary administration, if the appeal to the court is sent in accordance with Art. 183.14 of the same Law.
6. Other documents provided for by Federal Law No. 127.

Accept Application

Copies of the arbitral award on acceptance of the appeal for consideration are sent to the applicant, the insurance company and the control authority no later than the day following the date of its issuance.

The supervisory authority, in turn, sends a copy of the ruling to the self-regulatory organization and the Deposit Insurance Agency.

Case review

Proceedings on the bankruptcy of insurance companies are carried out in the arbitration court. In this case, the provisions of the APC and Federal Law No. 127 apply.

An application for declaring an insurance company insolvent is accepted by the court if there is at least one of the above signs. In case of bankruptcy of an insurance company, when assessing the financial condition, its obligation to make compensation payments, as well as to deduct part of the premium in case of early termination of the insurance contract, is taken into account. The obligation must be established by federal law, enforceable by court order, or insurance agreement.

When initiating bankruptcy proceedingsinsurance organization at the request of the provisional administration, the duration of the proceedings should not exceed 4 months. from the date of acceptance of the application for consideration. This period includes the time allotted for preparing materials and making a decision.

Nuances

When considering a case, the procedures for recovery and external management, provided for by Federal Law No. 127, do not apply.

When proceedings are initiated at the request of the interim administration due to the impossibility of restoring the company's solvency, the monitoring procedure is not assigned.

Termination of the contract

When the court decides to declare the company insolvent and start bankruptcy proceedings within a month from the date of receipt of the relevant notification, the policyholders may unilaterally cancel the insurance contract.

At the same time, they have the right to count on a part of the premium paid to the bankrupt company for the unexpired period of the agreement or to receive a redemption payment.

Meeting of creditors

Its participants are the authorized bodies and bankruptcy creditors, whose claims are entered in the register on the date of the meeting. These entities have the right to vote.

Representatives may participate in the meeting without the right to vote:

• of the debtor's employees;
• participants/founders;
• of a self-regulatory organization in which the arbitration manager is a member;
• supervisory authority.

Thesepersons may speak on issues included in the agenda of the meeting. As a rule, the address where meetings of creditors are held in Moscow on decisions of arbitration in cases of bankruptcy of insurance companies is Bolshoy Golovin lane, 3, bldg. 2 (2nd floor).

Transfer of insurance portfolio

The beneficiaries and policyholders must be notified by the interim administration, the liquidator or (if not appointed) by the insurance company itself of the forthcoming transfer of the portfolio. The notice is published in the manner prescribed by Art. 28 F 127, no later than one month before the procedure.

The notice must contain the following information:

1. Name of the company transferring the insurance portfolio, state registration number in the status of a legal entity, TIN, address.
2. Reason for this operation.
3. Information on the suspension/restriction of the powers of the executive structures of the organization transferring the portfolio.
4. Name of the management company, identifying features (TIN, state registration number), address.

IC "Investments and Finance"

In July 2016, by decision of the Central Bank, the powers of the company's executive structures were suspended. In October of the same year, information appeared about the revocation of the license from the investment and finance insurance company. The bankruptcy of the enterprise was initiated by a temporary administration appointed by the Central Bank.

The decision to revoke the license was due to:

1. Committing by the company of actions contrary toRF legislation.
2. The presence of deviations from the provisions of regulatory acts that have not been corrected within the prescribed period.
3. Failure to comply with the instructions of the Central Bank.

When the first information appeared about the likelihood of initiating proceedings against the company, customers and partners were advised to file their claims in writing and send them to the arbitration court as soon as possible.

SG "Uralsib"

The first application from individuals to declare the company insolvent was sent to court in December 2016. On January 31, 2017, the first application was filed from a legal entity.

According to a survey of a number of market participants, the enterprise's debt to partners reaches several tens of millions of rubles.

Analysis of financial statements for 2015 showed that the organization worked for two consecutive years with negative capital. The company's assets by the end of this year were less than the amount of liabilities by 2.9 billion rubles. In addition, the company violated the standards of the Central Bank on the solvency margin, placement of own funds and insurance reserves.

11.08.2016 the validity of the license of SG "Uralsib" was limited due to non-compliance with the instructions of the Central Bank.

At the end of January, the company's reliability rating was confirmed at B++.

According to experts, such a low figure is associated with non-fulfillment of regulatory requirements and a negative deviation of the actual solvency margin from the established norm.

Specialists also noted:

• negative marginown funds and assets;
• reduction of own funds;
• negative result of insurance operations reviewed for 4 consecutive quarters without cumulative total;
• reduction in contributions;
• low liquidity (payback) of investments and decrease in their value;
• high ratio of receivables and payables to assets, etc.

It should be said that the rumors about the bankruptcy of the Uralsib insurance company have been circulating for quite a long time. This company is part of the assets of Uralsib Bank, where since the autumn of 2015 a recovery procedure has been carried out with the participation of the head of the Oil and Gas Industry, V. Kogan, and the Deposit Insurance Agency.

SK "Podmoskovye"

Since May 24, 2017, a temporary administration has been working in the organization. On July 20, an application for initiation of bankruptcy proceedings was registered in the Moscow Arbitration Court. The Podmoskovye insurance company lost its licenses the very next day - on July 21 it was revoked by the Central Bank. The company is prohibited from conducting activities on voluntary personal and property insurance, as well as OSAGO.

The corresponding decision was made by the regulator in connection with the failure by the company to eliminate violations of the provisions of the legislation governing insurance activities within the time period set by the Central Bank, in connection with the identification of which the validity of licenses was suspended.

In particular, the company did not comply with the requirements for solvency and financial stability in terms of creating insurancereserves, the conditions and procedure for investing reserve and own funds have not been met.

According to the Central Bank, the amount of fees of the insurance company for 2016 exceeded 1.6 billion rubles, and payments amounted to 596.7 million rubles.