Venezuelan insurance regulator Sudeseg will seize control of the operations of medium-sized insurer Banvalor Seguros, saying the company failed to meet underwriting reserve requirements.
The administrative intervention is the latest in a series of government takeovers of Venezuelan financial institutions that started in late 2009.
In a resolution published on Thursday (Sept 23) in the official government gazette, Sudeseg said the insurer's underwriting reserves were short by 89.9mn bolivares (US$21mn), equivalent to 720 basis points of the insurer's underwriting reserve ratio.
According to Sudeseg numbers, Banvalor Seguros officially maintained a reserve ratio of 1.27% through the end of July, slightly below the 1.33% industry average.
However, Sudeseg said part of the reserves were not valid because the company was holding 181mn bolivares in securities deposited in HSBC Private Bank, "a financial institution that is not an authorized Venezuelan depositary."
The resolution said Banvalor Seguros had been warned about a possible intervention as far back as April of 2009.
Contacted by BNamericas, Sudeseg representatives said the regulator would be issuing a statement, but no statement was received as of deadline.
Likewise, no one at Venezuelan banking regulator Sudeban was authorized to speak on the record on whether Banvalor - a small bank in the same financial group as the insurance company - would also be taken over.
NO SMALL FISH
As of the end of July, Banvalor Seguros ranked 13th in the country, with written premiums of 435mn bolivares and a 2.29% share of the Venezuelan insurance market. However, as recently as 2007 Banvalor was vying for the first place position in the market.
Venezuelan regulators took over more than a dozen banks and financial institutions during the closing months of 2009 and into the beginning of this year, citing financial malfeasance and putting some bank managers and owners in jail.
During the first half of 2010, the government turned its attention to brokerage houses that had dealt in bond swaps on the parallel currency exchange market, again shuttering many and jailing some executives on fraud charges.
Among the financial institutions taken over in 2009 were Seguros La Previsora, a medium-sized, healthy insurance company part of a troubled financial group. The government officially expropriated the insurer in August and is now using its infrastructure to build a state-run insurer.