INSURANCE SECTOR ASKS FOR RESTRUCTURE OF LIABILITIES
27 June, 2013
INSURANCE SECTOR ASKS FOR RESTRUCTURE OF LIABILITIES
Georgian insurance sector asks for restructuring its liabilities and increase of its premiums in the state-supported social health insurance packages to escape the bankruptcy. The independent regulatory body of insurance sector will scrutinize the financial papers of companies and outline recommendations, based on which the authorities will decide whether or not to meet the insurance sector’s appeal.
The newly established independent Insurance Regulatory Service of Georgia that has seceded from the National Bank of Georgia since April 5, 2013, has
to handle the difficult task of stabilizing situation in Georgian insurance sector, facing bankruptcy due to unexpected reforms in health insurance, unless their financial liabilities are restructured or premiums increased. “We will delve in financial affairs of seven companies that are carrying out social programs in health insurance and we’ll put out the analysis in around 2 months, which will be based on the fact how reasonably the companies’ managements were effected, the government will draw out recommendations,” Lasha Nikoladze, Head of the Insurance Regulatory Service, said in the interview to Georgian Journal.
Once growing insurance sector has faced losses since 2011 due to the large portion of health-insurance making around 70% in Georgian total insurance portfolio and involvement in hospital sector construction/management taking around GEL 200 million of investments still pending for paying-back. The insurance sector’s problem traces back to 2010 when insurance sector took over the state health-care insurance beneficiaries under granted governmental financing for much below the market price and developed the art-of-the-state hospital network throughout the country under the crack-down of the ex-power. To offset the loss the ex-power vested winner companies with the construction and operation rights of hospitals in regions plus granted by exclusive insurance provider positions in their hospitals adjacent districts that deprived clients of the choice and made insurance companies monopolists in both insurance and medical service provider market. The power shift challenged the sector furthermore: new authority is intent to take over the overall health insurance system at its hand through the State Insurance Fund and cuts out the secured state injections to the private sector. The Fund started operation in this past February by offering the minimal health-insurance packages to the entire population and introduces basic packages since July 1st, 2013 to all who is not covered either by social or corporate health insurance. However after expire the social insurance of pensioners and socially vulnerable people in this September and April of 2014 respectively very likely the state will take them over. Moreover, to demonopolize the sector governments plans to ban running pharmaceutical and hospital assets to the insurance companies. A sharp cut-out of the hospital assets may send companies simply bankrupt, sector pundits worry. Alfa insurance company implementing social health insurance has already left the market passing its social responsibilities to the state fund. If the situation goes ahead in this way the state will be encumbered by more and more social obligations prior the privately managed social programs will expire. Therefore Giorgi Gigolashvili, Head of Georgian Insurance Institute, presumes a right move to the state to restructure liabilities to companies so as escape social and budgetary problems.
“Companies are responsible for their behavior that participated in the social programs and fixed low market prices. We have been predicting at the very outset that they would have faced this kind of difficulties sooner or later but the state will also have problems if more companies will leave the market now and I would approve this interim remedy to restructure social liabilities at this moment. But this should be a lesson to insurance companies,” he said.
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