Parman loses lawsuit: emergency measure at ENNIA remains in place

PHILIPSBURG — “Okay, then you start the emergency regulation.” With those words Hushang Ansary, the 93-year old Persian-American major shareholder of Parman International BV walked out of a meeting with the Central Bank of Curacao and St. Maarten on June 21, 2018. The meeting was about a plan to solve problems at insurance company ENNIA but Ansary refused to support this plan. A day later, Ennia Caribe Investments moved $100 million to Parman Enterprises LLC, an Ansary-controlled entity outside of the Ennia group of companies.

All this appears from a ruling by the Court in First Instance in Curacao about Parman’s demand that the court orders the Central Bank of Curacao and Sint Maarten to withdraw the emergency measures imposed on Ennia and its affiliated entities. The court denied the demand.

On July 3, 2018, the central bank revoked Ennia’s license and a day later the court pronounced the emergency measure. Since that date, the central bank controls Ennia, giving it the power to withdraw the company’s appeal against the revocation of its license. Parman however also appealed the revocation of the license; a decision about this appeal is still pending.

The central bank intervened with Ennia over concerns about its deteriorating solvency deficit and Parman’s lack of cooperation.

Parman demanded in summary proceedings that the court orders the central bank to withdraw the emergency measure and to forbid the bank to execute the emergency measure. According to Parman, this order should not only cover the insurance entities but also the non-regulated entities. Furthermore, Parman asked the court to suspend the steps the central bank has undertaken under the emergency measure and to order the bank to enter into negotiations with Parman about the restructuring of Ennia.

Parman based its demands on the fact that the assets and affiliated shares of the Ennia-entities have decreased in value since the central bank put the emergency measure in place. (Indeed, according to a ruling from the United States Bankruptcy Court in the Southern District of New York, the value of these assets has plummeted from around $175 million to below $124 million).

Parman claims that the decrease in value continues as long as the emergency measure is in place. The company furthermore argued that the central bank had no valid reason to activate the emergency measure. “It is correct that the insurers do not meet the solvency criteria but this is a matter of accountancy that can be easily resolved and certainly does not justify a drastic measure like the emergency measure,” Parman stated to the court.

Furthermore, Parman said, negotiations with the central bank were still ongoing and the emergency measure could not be put in place because the revocation of Ennia’s license was still not irrevocable.

Parman argued that the troubles at Ennia are a “matter of accountancy” because the central bank changed the rules for insurance companies in 2015: they were no longer allowed to include intercompany receivables for the calculation of solvency.

The court ruled however that the current rules apply and that insurance companies have to abide by them. “If they do not do that then the supervisor has the right to intervene.”

“The intervention by the central bank was based on Ennia’s solvency problems – in other words, its financial stability for the long term. Parman’s story about the Ennia group’s rosy financial situation seems to be mostly related to the company’s ability to meet its obligations in the short term,” the court ruling states.

The court dismissed Parman’s argument that the situation can simply be solved with a restructuring of Ennia. “If this were so, the court does not understand why this has not been realized a long time ago.”

The ruling states that the new rules for insurance companies have been in place for quite some time, that Ennia knew already several years before 2015 that these measures were in the pipeline and that they would have consequences for the company.

The court backs up the central bank with its doubts about the value of assets that are on the books of Ennia Caribe Investments. Mullet Bay in St. Maarten is the largest asset; according to ECI its value is around 770 million guilders ($430 million), but according to a recent appraisal executed at the request of the central bank it is just 90 million guilders ($50 million).

Considering the substantiation presented by the bank, the court considers it “insufficiently plausible” that the bank’s opinion about the value of Mullet Bay is incorrect.

The court also dismissed Parman’s argument that ECH (the holding) and ECI (the investment entity) do not fall under the supervision of the central bank. Given the fact that most of the assets of the insurance entities are parked at ECI, the court considers it a part of the Ennia group that falls under the central bank’s supervision.

“Otherwise those who are responsible for the management of Ennia’s assets – and therefore for the question whether the claimholders can count on the insurer’s ability to make payments in the future – would be completely beyond supervision.”

The central bank reacted in a brief press release to the court ruling. “The court rendered its verdict on January 31, 2019 and dismissed all claims of Parman. The CBCS will continue with the restructuring of Ennia in the benefit of all policyholders.”