Since July, insurers must make double the regular monthly deductions in the vehicle owners’ compulsory civil liability (OCTA) insurance guarantee fund, the Latvian Vehicle Insurance Bureau (LTAB) told the LETA agency.
The data of the office show that on June 30, 2022, the Guarantee Fund had 14.34 million euros, which is the lowest level since 2015.
“This is largely related directly to the significant compensation payments made in recent years on behalf of the insurance company “Balva”, the OCTA discounts to be paid to farmers and persons with disabilities, which must be financed from the OCTA Guarantee Fund, as well as other factors,” explains Jānis Abāšins, chairman of the LTAB board.
He also informs that from July 2022, insurers must start making regular monthly deductions to the OCTA Guarantee Fund in a double amount.
LTAB states that the OCTA Guarantee Fund has so far paid out approximately four million euros in compensation to its clients instead of the “Prize”, but according to LTAB’s calculations, the remaining liabilities of the “Prize” could be another 1.6 million euros, thus the OCTA Guarantee Fund ” “Balvas” will have paid out about 5.6 million euros due to insolvency. In April 2022, the insolvency process of “Balva” was terminated.
Abāshin notes that these funds in the Guarantee Fund will never be recovered. “The guarantee fund did not receive anything from the insolvency process of “Balva”, because the recovered funds were only enough to satisfy the demands of employees and the state, while the demands of other creditors remained unsatisfied,” he says.
Also, Abāšin mentions that the insolvency of “Balva” clearly shows that the bankruptcy of one market participant significantly affects the size and operation of the OCTA Guarantee Fund.
“From this negative and painful experience, all OCTA market participants have to learn a lesson. First of all, the regulator should monitor market participants more strictly and consistently, because “Balva” ended its operation with a large amount of liabilities, which the company’s own accumulated reserves were far too small to cover. Second. , the rationality and usefulness of the discounts financed from the Guarantee Fund must be assessed. We are not against relief for farmers or persons with disabilities, but in our opinion, the funds for this should be sought in the social budget, and not placed on the shoulders of insurers and all drivers collectively,” explains the chairman of the LTAB board.
At the beginning of the year, in an interview with the LETA agency, Abāšin mentioned that insurers should start contributing more funds to the Guarantee Fund when the amount of the fund drops below 14 million euros. In this case, insurers have to double their contributions to the fund, which also has a small impact on OCTA policy prices. “It won’t be more than black behind the nail, because if from an annual policy this contribution is, for example, one euro, then it will be two euros, from a half-year policy – instead of 60 cents, it will be 1.2 euros. Against the background of the total policy price, this is not nothing major,” he explained.
LTAB ensures the operation of the OCTA insurance system in the country, as well as administers the OCTA Guarantee Fund. OCTA was introduced in Latvia in 1997 to ensure the protection of the interests of third parties injured in road traffic accidents. Initially, the office operated under the Ministry of Finance, but since 2004 it has been an independent institution.
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