Seguros Konsegur de Garantías y Crédito SA reported, through an essential fact, that at the end of July 2024 the company presented a Deficit of Investments representing technical reserves and risk assets for an amount of MM$17,789; deficit of Net Worth on Risk Assets of MM$28,376. This situation meant that the company reported a negative Net Worth of MM$14,921 and a negative Book Equity of MM$14,919.
In view of the above, it is not possible to determine the ratios established in the current regulations. Furthermore, at the end of July 2024, the Company’s equity is lower than the minimum established in article 7 of DFL 251.
“As a result of the various deficit scenarios presented by the Company, the Financial Market Commission has adopted the following measures to protect policyholders and the market in general: Suspension of marketing of insurance policies as of December 2, 2022 for the period in which the deficits continue, being able to endorse policies already issued; and suspension of the administration of the Company and appointment of a Managing Director as of January 5, 2023,” the firm indicated.
He stated that, by Exempt Resolution No. 5422 dated June 17, 2024, said Commission extended the suspension of the administration of the company and the appointment of a Managing Director until January 4, 2025 for an additional 6 months, without prejudice to the possibility of proceeding with the extension of such appointment.
The situation concerning Seguros Konsegur de Garantías y Crédito SA illustrates significant financial distress within the company, evidenced by its reported deficits. Here are the key points and implications of this situation:
- Deficits and Negative Equity: As of July 2024, Seguros Konsegur has reported:
– A deficit of investments related to technical reserves and risk assets amounting to MM$17,789.
– A deficit of net worth on risk assets of MM$28,376.
– A negative net worth of MM$14,921 and negative book equity of MM$14,919.
This indicates that the company’s liabilities significantly exceed its assets, which raises concerns about its solvency and ability to meet its obligations to policyholders.
- Regulatory Implications: Due to these deficits:
– The company cannot calculate the required financial ratios as per regulations, creating uncertainty regarding its financial health.
– The firm’s equity is below the minimum requirements set forth in Article 7 of DFL 251, which governs insurance companies.
- Measures Taken by the Financial Market Commission: To protect policyholders and ensure market integrity, the Financial Market Commission has implemented several measures:
- A suspension of marketing insurance policies was initiated on December 2, 2022, preventing the company from issuing new policies until the deficits are resolved.
– The administration of the company was suspended, effective January 5, 2023, with a Managing Director being appointed to oversee operations.
– This management suspension was extended through Exempt Resolution No. 5422 on June 17, 2024, indicating ongoing concerns about the company’s financial viability until at least January 4, 2025, which could be subject to further extension.
- Impact on Policyholders: Stakeholders, particularly policyholders, need to be aware that their coverage may be at risk if the company’s financial situation does not improve. The suspension of new policy sales and the change in company management are protective measures aimed at preventing further harm.
- Future Outlook: The financial health of Seguros Konsegur will depend on:
– Steps taken to address the existing deficits and restore solvency.
– Compliance with regulatory requirements and potential restructuring efforts.
– Continuous monitoring by the Financial Market Commission and the response by the company to improve its financial standing before the extended administration period concludes.
Seguros Konsegur de Garantías y Crédito SA is currently navigating a significant crisis characterized by substantial financial deficits, regulatory intervention, and management changes aimed at safeguarding the interests of policyholders and ensuring market stability.
