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An insurance company manager who files for bankruptcy will face levy

Insurance company executives will be held responsible with their assets when they cause the bankruptcy of the insurance company they manage. Where the transactions conducted by the executive have also benefited the shareholders, then, shareholder will also be obliged to pay the damages

An insurance company manager who files for bankruptcy will face levy

Insurance company executives will be held responsible with their assets when they cause the bankruptcy of the insurance company they manage. Where the transactions conducted by the executive have also benefited the shareholders, then, shareholder will also be obliged to pay the damages

Erhan NAVRUZ
Erhan NAVRUZ
20 Temmuz 2017 Perşembe 01:37
An insurance company manager who files for bankruptcy will face levy

The bag bill which is in the agenda of the Parliament's Planning and Budget Sub- commission brings forth important regulations on the Insurance Code. When the regulation takes effect, general managers of insurance companies will be held responsible with their assets in case of the bankruptcy of the company they manage, as it is the case for general managers of banks. In other words, they will be obliged to pay for the damages. And if they fail to do so, their properties will be seized. According to the bag bill, the provision of ‘any partnership rights and management and audit of the company will be transferred to the account’ was included in the situations which requires the use of Security Account, an account which compensates the insured in case of failure of the insurance company to pay the insured.  Accordingly, when the company experience hard time to perform its insurance duties, then all the rights available will be transferred to the Security Account. However, in case the company structure was disturbed by its managers, then, they will be obliged to pay for the damages.

The bill suggests that when the managers of a company are found responsible for the bankruptcy as a result of illegal decisions and transactions, they will be held personally responsible limited to the damages they caused.  Upon the request of the account and the decision of the undersecretariat, the court will rule for the personal bankruptcy of these individuals. When such decisions and transactions are made to provide interest for the controlling shareholders, then any shareholder who benefited from the situation will be required to pay for the damages.

LOWERING THE VALUE OF THE COMPANY

According to the new regulation, shareholders of insurance and reassurance companies, their members of the Board, auditors, managers and employees shall not use the company resources in a way that compromises the company’s reliable operation, whether explicitly or implicitly, they shall not perform transactions which will reduce the value of the active in defiance of goodwill, and they shall never transfer revenues in discretion. Moreover, insurance and reassurance companies shall not collateralize their assets for their employees, shareholders, affiliates or other individuals and corporations with the exemption of their debts or the ones arising from insurance transactions, they shall not stand as a guarantor and shall not lend loans to such entities.

BANKRUPT COMPANY WILL SELL ITS CLIENTS

In case of permanent cancellation of permits of all the fields due to financial vulnerability of the insurance company, the company is entitled the right to transfer its policies to another company or to cancel such policies except the compulsory insurance policies, having refund the premiums paid in order to reduce the risks.

INDEMNITY INSURANCE WILL PREVAIL IN THE TENDER

According to the bill, it will be possible to use indemnity insurance in tenders as an insurance product alternative to letter of indemnity. With this adjustment, it is believed that indemnity insurance will serve as an alternative to letter of indemnity and that investors will more easily access funding. Nevertheless, it was agreed that the Ministry of Finance shall share the taxpayer information including the financial data available in its records with the Insurance Information and Supervisory Center in order to be used solely in risk assessment upon the request of the Undersecrateriat, provided that the taxpayer information remains confidential.

SERVITUDE WILL ALSO BE INCLUDED IN THE COVERAGE OF COMPULSORY INSURANCE

With the regulation, once was an obligation only to have earthquake insurance when performing transactions at directorates of land registry, now the extent of this obligation will be increased to include also servitude and condominiums. Directorates of land registry shall not perform the registry or cancellation transactiona unless it is documented that the compulsory earthquake insurance is purchased and effective on the transaction date for any building subject to compulsory earthquake insurance with servitude or condominiums are provided in the lend registry, and any land on which a structure is built whether it was not granted a servitude or condominium.

EQUIVALENT PARTS ARE MENTIONED IN THE LAW

With the bag bill, it will also be legal to use equivalent but not original spare parts with licenses for the repairs in case of traffic accidents.

The reason behind the inclusion of this article in the bag bill was the decision of the Council of State in November, 2016, which ruled against the article which allows for the use of used and dismantled parts for the repairs under the traffic insurance in a lawsuit filed by the Union of Turkish Bar Associations against the “General Specifications on Highway Motor Vehicles Compulsory Automobile Liability Insurance”.

The preamble included the following: “This matter is the condition of competitiveness as much as it is a requirement of insurance principles. With this practice, it will also be possible to contribute to local industry which manufactures these parts. In this context, the article was prepared in order to provide the basis for the use of equivalent parts provided that they have necessary supply documents.”

RAHİM AK/GAZETE HABERTÜRK

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