The State owes Insurance Sucre USD 129 million

One of the main risks to which the state capital insurer Sucre is exposed is the liquidity to deal with its obligations.That is, do not have cash to attend, for example, the payment of claims to your customers.

This requires the Risk Qualification Report of December 2020 from Bankwatch Ratings that also points out that this indicator has been deteriorating the last years.

December 2020, the liquid assets of the insurer, whose largest shareholder is the state national financial corporation (CFN), only covered 14% of its liabilities, lower than the average of the insurance sector that is located at 35%.

Liquidity risk comes from three factors.The first is the lack of payment of its state clients, which weigh 93% of its portfolio.In total the debt of public institutions with Sucre sum USD 129 million."The State does not have a liquid fiscal box to solve the services contracted by public entities," is noticed in the report.

The second problem with which Lidia Sucre is the recovery of values pending payment of reinsurance and coaseguros, which add USD 56.8 million.But Sucre also has a pending debt with its reinsurance, some payments have more than a year old, the risk qualification report requires.

Sucre has 65 clients, of which the greatest insured amount corresponds to a multi -risk policy of the Ecuadorian Electric Corporation that, among other goods, covers hydroelectric plants.This contract expires on August 1.

A third problem of the insurer are the legal litigation that four public entities filed against them: Petroecuador, Celec, National Electricity Corporation (Cnel) and Affiliate Bank (BIESS).The judgments total USD 152.8 million (see picture).The most important litigation is Biess.The policy dates from 2015 and it was to cover life insurance, relief, unemployment and other aspects.

The contract, which extended until July 2019 through several extensions, received criticism from the insurance sector because it was USD 13 million more expensive than other offers.

But the litigation originated by a "good experience" clause that forces Sucre to return USD 37.9 million, a value that would affect the insurer's heritage.

Sucre also drags old litigation as a sinister millionaire not recognized to Petroecuador for the breakage of his pipeline.This controversy was an inheritance of Rocafuerte, with which Sucre merged in 2008.The state capital insurer argues that the amount was canceled, but Petroecuador insists that he is firm.

The 2016 earthquake caused a Cnel claim.The state firm suffered the effects of this telluric movement and claims sinister for damage to weathering as public lighting.Finally, the Celec dispute is due to damage at the Pucará Central.

Sucre is the country's main insurer, with a weight of 17% in the market.As of December of last year, its assets added 79.6 million and had losses of 8.7 million.

In spite.

The risk rating, in response to a consultation of this newspaper, said that the good qualification of last year was due to the fact that the losses of 2020 represented only 10% of the heritage, "which alone does not put their solvency at risk".

Another factor that took into account Bankwatch was a foreseeable decrease in the entire insurance sector by pandemic and increasing accidents due to the payment related to COVID-19.

In addition, he argued that the loss is explained because the company had to be provisioned for doubtful collection accounts and for investment deterioration, derived from the recognition of expected losses.

This newspaper published yesterday that, at least, 10% of Sucre's investment portfolio is at risk of recovery or already fell into non -payment.That is, USD 5.4 million 59 million.After the settlement announcement, Bankwatch lowered BB qualification with developing observation.

This newspaper consulted the ‘Super’ of companies if it issued observations to the qualification report and more details about the situation of Sucre, but did not respond until the closing of this edition."We do not expect them to be (observations), since our opinions have been founded technically," Bankwatch said.

This newspaper sought the version of Sucre and CFN on June 23 and 29 and July 13, but did not receive an answer.