Olympic
Comments of the Guarantee fund on frequently asked questions, related to Olympic insurance company Ltd
03 March 2022
The Guarantee fund has received numerous inquiries regarding Olympic insurance company, coming from citizens, lawyers and other parties. In light of the topic and given the public benefit of having access to truthful and precise information, the Guarantee fund summarized its comments and replies to the most frequently asked questions. The goal of this summary is to assist the better understanding of processes, steps and actions taken concerning the Olympic case and provide this information to a broader audience that is interested in it.
- What are the steps that need to be taken and finalized before payments can be made under claims on insurance contracts, signed through the Bulgarian branch of Olympic?
In order to start the payment process for claims under insurance contracts, signed through the Bulgarian branch of Olympic, the following stages need to be finalized in order:
First stage: Determining the institution that will bear the financial responsibility under the insurance contracts, signed through the Bulgarian branch of Olympic. This stage has been completed successfully and in favor of the Bulgarian party, following the decision of the arbiter with the Center of Bureaux, dated October 2021, with the responsible institution named being the Cyprus Guarantee fund.
Logic dictates that in order to execute any sort of payment, the payer needs to be established first. In other words, determining the institution that bears the financial responsibility in regards to the insurance contracts, signed through the Bulgarian branch of Olympic, is the root of the matter and is the first reference point for its further resolution.
The Bulgarian party has always maintained the position that financial responsibility should fall on the guarantee fund from the same country that the insolvent insurer is from – in this case, Cyprus. This position was contested by the Cyprus Guarantee fund and at the point in time when the Olympic case arose, there was no uniform regulation applied on a global EU level when it comes to compensating insurance customers in case of an insolvent insurer. In those conditions, the Bulgarian Guarantee fund called upon the 1995 Convention for the right of recourse between guarantee funds. Following the refusal of the Cyprus guarantee fund to acknowledge its applicability to the case, the Bulgarian Guarantee fund filed a claim with the Council of Bureaux and the outcome of this trial is known. The proceedings described took place over 4 years, which is due both to the complexities and peculiarities of international legal disputes and actions and their inherent length, as well as to the position of the other party in the dispute – the Cyprus Guarantee fund. Despite all this, the Bulgarian Guarantee fund successfully protected the interests of Bulgarian citizens.
Second stage: Presence of clearly stated and mutually accepted mechanisms and procedures to use when effecting payments, i.e. a Technical agreement.
This stage includes drafting up and signing a Technical agreement between the Bulgarian and Cyprus Guarantee funds. Presently, this process is actively being worked on and moving towards finalization. We should point out that this is a stage in which, through negotiations between the two sides, the scope of claims and the procedures and payment mechanisms are determined, in addition to the mechanisms for reimbursement on part of the Cyprus Guarantee fund of sums paid by the Bulgarian Guarantee fund, as well as other aspects of the process. Without the finalization of this stage, it is impossible to commence with any sort of payments.
The goal of the Bulgarian Guarantee fund is the quick finalization of the process of signing the Technical agreement, while ensuring the most beneficial conditions for the Bulgarian side. However, in addition to the Bulgarian Guarantee fund, two other entities are parties in this process – the Cyprus Guarantee fund and the luquidators of Olympic. The finalization of this stage depends on their cooperation and promptness.
- Why the payment of claims under insurance contracts signed through the Bulgarian branch of Olympic cannot commence solely based on the decision of the arbiter with the Council of Bureaux, dated October 2021?
The decision of the arbiter with the Council of Bureaux answers the question “Who is the payer that bears the fiduciary responsibility?” but this decision does not settle some essential and practical questions that we can summarize as “What exactly is being paid out and in what specific way?”. Those questions are going to be addressed in the abovementioned Technical agreement. It will settle the scope of claims, the procedures and mechanisms for payments and claims, the mechanisms for reimbursement on part of the Cyprus Guarantee fund of sums paid by the Bulgarian Guarantee fund, as well as other essential aspects of the process. This is why it is practically impossible for any payments to commence without the finalization of this stage.
- Why is it taking so many years to effect payments under insurance contracts signed through the Bulgarian branch of Olympic?
In short, the reason for this is the duration of Stage 1, described in one of the frequently asked questions above – determining an institution that will bear the fiduciary responsibility in regards to the insurance contracts signed through the Bulgarian branch of Olympic. This, in turn, is related to the refusal of the Cyprus Guarantee fund to admit that the fiduciary responsibility should fall on the guarantee fund from the country of origin of the insolvent insurer. The Bulgarian side has always maintained the position that the responsibility falls on the Cyprus Guarantee fund. Let us also mention that the Insurance Code stipulates that the Guarantee fund, through the Reserve fund managed by it, has the right to reimburse claimants in case of insolvency of an insurer that is headquartered in the Republic of Bulgaria. The Code does not include insurers that are headquartered in a EU state, operating in Bulgaria through a branch, which is the case with Olympic. It should also be noted that at the time when the Olympic case arose, there was no uniform regulation applied on a global EU level when it comes to compensating insurance customers in case of an insolvent insurer. Under those conditions, the Bulgarian Guarantee fund called upon the 1995 Convention for the right of recourse between guarantee funds. Following the refusal of the Cyprus guarantee fund to acknowledge its applicability to the case, the Bulgarian Guarantee fund filed a claim with the Council of Bureaux. Following an arbitrage decision, the case was resolved in favor of the Bulgarian side. The decision stipulates that the fiduciary responsibility in regards to the insurance contracts, signed through the Bulgarian branch of Olympic, falls on the Cyprus Guarantee fund. In this way, following a 4-year period of proactive involvement on part of the Guarantee fund, stage 1 of the overall process was completed and we began work on the process of drafting up and signing a Technical agreement (stage 2).
We should highlight the fact that amendments to the Motor Insurance Directive have already been promulgated, including the introduction of a harmonized mechanism for compensation in case of insolvent insurers that offer motor third party liability insurance. This mechanism is based on the principle that the responsibility for compensations in case of an insolvent insurer falls to the insurance plan of the country of origin of the insurer.
- When will the Technical agreement be signed?
The goal of the Bulgarian Guarantee fund is the quick finalization of the process of singing the Technical agreement, while ensuring the most beneficial conditions for the Bulgarian side. It should also be noted that, in addition to the Bulgarian Guarantee fund, two other entities are parties in this process – the Cyprus Guarantee fund and the luquidators of Olympic. The finalization of this stage depends on their cooperation and promptness.
- How will the commencement date of payment of claims under insurance contracts signed through the Bulgarian branch of Olympic be announced?
After the finalization of the process of signing the Technical agreement, the Guarantee fund will announce the commencement date of payments, as well as the conditions for those payments, using its official website as well as the media.
We would like to remind citizens who address the Guarantee fund, insisting that they are given a specific date, that the announcement of this information is not performed using two-way email correspondence between private persons and the Guarantee fund.
- Why hasn’t the Guarantee fund published the decision of the arbiter of the Council of Bureaux on the case between the Bulgarian and Cyprus guarantee funds?
The arbitrage decision on the case between the Guarantee fund of the Republic of Bulgaria and the Guarantee fund of the Republic of Cyprus, as conducted with the Council of Bureaux, concerns a dispute between the two legal entities and has no applicability to third parties. In addition to this, it contains a confidentiality clause and cannot be disclosed in its entirety. In other words, the arbitrage decision is not a public document.
It is possible that the interest in the decision arises from the incorrect belief that it contains information pertaining to practical and technical aspects relating to the payment of claims under insurance contracts signed through the Bulgarian branch of Olympic, or other technical details.
The decision contains no such information and it cannot contain it, in as much as the nature of the arbitrage decision concerns the Convention for the right of recourse between guarantee funds in cases of insolvency of an insurer that offers insurance for damages caused by third parties to a motor vehicle, operating on the single market, dated July 24, 1995.
The decision of the arbiter has been made public, namely that the Convention is applicable in the case with Olympic and that, respectively, the Cyprus Guarantee fund is responsible in regards to the insurance contracts signed through the Bulgarian branch of Olympic. The Convention itself is a private document that has binding force only between the parties that have signed it.
In relation to some questions that were not made particularly clear, we will use this opportunity to once again clarify that the arbitrage case that the Bulgarian Guarantee fund filed against the Guarantee fund of the Republic of Cyprus in relation to the insolvency of the Olympic insurance company was filed with the Council of Bureaux. The Council of Bureaux is an international organization comprised of 46 different national bureaus of motor insurers that are members of the Green card system. Further information about the organization’s activities can be found on its website – www.cobx.org.