Arseniy Yatsenyuk’s ally wants to put an end to Serhiy Tihipko’s insurance business

Photo: TAS Insurance Group

As of October 9 the State Financial Services Markets Regulation Commission (SFSMRC) suspended three licenses of one of the largest insurers in Ukraine – the TAS Group, according to a report on the commission’s website. This refers to suspension TAS operations in the segments of mandatory insurance of liability of car owners, “green card”, CASCO and voluntary health insurance, which accounts for 90% of the group’s business.

The report of SFSMRC says the reason for such a tough action against the insurer, which is one of the top 10 leaders in the Ukrainian insurance sector, is “violation of the law on provision of financial services”. At the time of publishing of this article the press service of the commission did not provide any comments on the matter. Member of SFSMRC Maksym Polyakov, who has been its acting head since March 2014, did not take our calls either. At present he is on leave, since he is running for the Verkhovna Rada as one of the members of the People's Front party headed by Yatsenyuk. Acting Chairman of SFSMRC Andriy Lytvyn is on medical leave.

Old case

The company itself considers the regulator’s order rather unexpected, to put it mildly. “We found out about it post factum,” says CEO of the TAS Insurance Group Pavlo Tsaruk. “Nobody discussed it with us, although the regulator has repeatedly stated its desire to resolve the market problems in the terms of crisis in cooperation with the shareholders and top managers of the companies”. Tsaruk says TAS will appeal the order on suspension of its licenses in court, which will automatically freeze the document’s effect for the period of the court proceedings. “That is why we will continue to sell policies - medical, “green card”, mandatory insurance of civil liability of car owners (also known as liability car insurance) and CASCO. I am convinced that we will win the case in court,” said Tsaruk.

Presuming that the order takes effect prior to the court ruling, the insurer will have a rough time. Experts estimated that for each day of the forced “downtime” without licenses the company of such a level will lose several million hryvnia.

The group is the leader in the liability car insurance and “green card” segments in Ukraine, holds 11^th place on the voluntary medical insurance (VMI) market and 13^th place among companies selling CASCO.

In general, over the first half of the year TAS collected almost UAH 350 mn in premiums and paid out nearly UAH 175 mn in indemnities to its clients. The company has no debt to the Motor (Transport) Insurance Bureau of Ukraine (MTIBU) and Green Card funds. Based on reports of the MTIBU, the company was also solid in terms of liability car insurance payments over 6 months of this year.

For this reason, Tsaruk believes the commission's decision regarding TAS has nothing to do with the company’s internal problems. The results of the inspection by the regulator in 2012 is the formal reason for suspension of licenses, he says. Two weeks ago the SFSMRC raised those results and issued its decision based on them. “The regulator’s claim relates to non-payment of interest on loans payable in 2012. Nobody tried to understand the causes of the debt, even though they were objectively rational. For example, the client has not provided documents about the insurance case. Moreover, the debt was paid off in full last year,” says Tsaruk.

Revenge and law

“Insurers need to pay their customers on time and then the regulator will have no questions to them,” says Chairman of the Supervisory Board at Salamander Ukraine Yuriy Yavtushenko. But most insurers still doubt that the punishment of TAS is purely due to delays in payouts to clients. “Then they should revoke licenses from 99% of the market, because in the current environment most companies cannot fulfill their obligations,” says a CEO of a large company, who declined to comment on the situation officially.

“It is imperative to ensure the transparency of such decisions, including an increase in the role and duties of the Public Council at SFSMRC, especially in matters relating to framework insurance companies,” said President of the League of Insurance Organizations of Ukraine (LIOU) Oleksandr Zalyotov.

Experts name several reasons for the suspension of TAS licenses. First of all, this may be the revenge of the People's Front (on behalf of which Polyakov is running for the VR) against rival politician and leader of the Strong Ukraine party Serhiy Tihipko, who is considered to be the actual owner of the TAS Group. Officially, 99.9% of the insurer is owned by TAS Overseas Investments Limited in Cyprus. “It is possible, although I find it hard to believe, that one political force will hand over such a trump card to another force in throes of the political battle given the pressure of administrative resources on business,” says Chairman of the Insurance Commission at the Ukrainian Society of Financial Analysts Vyacheslav Chernyakhivskiy.

Experts believe that the struggle for the funds of MTIBU (more than UAH 300 mn - Capital) between the State Financial Services Markets Regulation Commission, MPs and the Presidium of the Bureau is a much more likely reason for revoking licenses of the insurer. Some insurers that are members of the presidium opposed the regulator’s actions, trying to control the MTIBU. TAS was among them. If so, then, according to Chernyakhivskiy, it is not companies that are experiencing actual problems with solvency, rather those insurers disagreeing with the commission that could be next in line to have their licenses revoked, for example, the subsidiary of the largest European group AXA. “Personal interests of several individuals can lead to a high-profile international scandal,” predicts President of the Ukrainian Insurance Federation (UIF) Andriy Peretyazhko.