The future of Astra Asigurari doesn’t only depend on it special administrator’s ability to attract the money necessary for an almost 100 million euros capital increase, but also on several judges. A dispute with the National Motorways and National Roads Company (CNADNR), another one with Oltchim and several hundreds litigation with road accidents victims or with relatives of such victims could bring Astra an expense of several tens of millions of euros. An amount which currently the company doesn’t own, as its liquidity ratio is close to zero. Under these circumstances, in case Astra loses the above mentioned cases, the winners will try to obtain their money by seizing company’s accounts or assets. This way, Astra’s bankruptcy will become almost certain.
The Oltchim dispute
In April 2014, Rominsolv, a company belonging to the famous lawyer Gheorghe Piperea and which was appointed by the court as special administrator for the Oltchim chemical factory, asked the court to pronounce the bankruptcy of Astra Asigurari. The request, described as unjustified and challenged by the Astra’s administrator KPMG, is based on an insurance against the bad management that was sold to Oltchim by Astra when Constantin Roibu was in charge of the factory. The value of this insurance was 10 million euros. Believing the reason Oltchim became insolvent was exactly the bad management, Piperea asked in 2013 for compensations. As Astra refused, the bankruptcy request quickly followed.
“It has been more than a year since we asked for compensations and there was no payment, so the only solution was to ask for their bankruptcy. We don’t expect them to pay, they already told us they won’t and they claim the international practices call for an international expert to certify the bad management. But they forget about the Romanian law, which provides that bad management is certified by the court-appointed administrator”, Piperea said when filing in the request. Astra’s appeal will be judged at the Bucharest Court of Law on 8 January 2015.
The CNADNR & Nelu Iordache litigation
Another lawsuit that might cost Astra a lot and that was already lost in the first phase is the one against the National Motorways and National Roads Company (CNADNR). The amount at stake is about 93 million RON, i.e. over 20 million euros. This time the dispute concerns several performance bonds issued by Astra for Romstrade, a currently insolvent company belonging to Nelu Iordcahe.
The source of the litigation between Astra and CNADNR is the contract for upgrading the national road 67C between Bengesti and Sebes. The deal was closed in 2008, when Romstrade committed itself to finish the works in a certain timeframe. CNADNR asked Romstrade for a 10% completion guarantee. Soon after that, the law changed and the company was allowed to provide a performance bond instead of the money. As a result, Romstrade signed several such contracts with Astra for an amount of 93 million RON.
When Romstrade became insolvent and wasn’t able to perform its contractual obligations, CNADNR asked Astra to compensate it according to the performance bonds. Astra refused, calling down two main reasons: Romstrade didn’t actually pay for those bonds and CNADNR wasn’t able to provide a correct estimate of the damages. Subsequently, CNADNR sued Astra and in the first phase of the lawsuit the judges ruled in its favour, but Astra submitted an appeal.
Thousands of victims, thousands of lawsuits
A third big problem is common to all the insurers who massively sold third party vehicle insurances – the lawsuits with the car accidents’ victims or their heirs. Last time when Astra officials talked about this issue they revealed the plaintiffs were asking for over 15 million euros as compensations. In fact, Astra is also the holder of the record for the highest third party vehicle insurance compensation paid in Romania. The company lost a lawsuit in Arad and was forced to pay two million euros to the relatives of a traffic accident. Another famous case, when Astra was forced to pay about 400,000 euros, is the involving the TV star Serban Huidu, who was responsible for an accident causing the death of two people. In the recent years, the judges seem to be favouring ordinary people over insurers in such cases.
The claims for injuries and deaths significantly increased in Romania after the authorities decided to raise the top compensation limit from 1.5 to 5 million euros. First such lawsuit was won in 2011 against Generali by the relatives of a car accident victim. Ever since, more and more lawyers became specialised in asking for moral damages. Romanian insurers currently have to pay a total amount of almost 100 millions euros for the owners of third-party vehicle insurances that provoked car crashes resulting in serious injuries or death.