The controversy surrounding Hild Bulgaria is about to prove the European Commission wrong when the EC says that Bulgarian institutions lack efficiency.

In less than a week, Hild Bulgaria, in essence by doing nothing at all, provoked bursts of speed in both Parliament and the Financial Supervision Commission (FSC) and a law was set to be fast-tracked for change specifically to deal with the company.

MPs were scheduled to vote on November 9 on the second reading of amendments to the Insurance Code that provide that only insurance companies may pay annuities or pensions to their clients in exchange for the clients' properties.

This was the latest development in the saga of Hild Bulgaria, a saga that has unfolded rapidly in the past two weeks.

Hild Bulgaria is a company that has made Bulgarians aged over 65 its market. The company offers pensioners the option of transferring their properties to Hild in exchange for a lifelong monthly allowance and cash in the bank. The Hild Bulgaria advertising campaign started a month ago on all national TV channels with a prime time advertisement featuring some of Bulgaria's most famous actors, all in their late 60s. The extremely low pensions that elderly Bulgarians get from the state, with the average being about 120 euro a month, made Hild's offer almost irresistible and it quickly gained popularity. Out of a population of about 7.7 million people, Bulgaria has more than two million pensioners, with most owning their apartments and houses.

On October 31, the Financial Supervision Commission (FSC) sent Hild Bulgaria a letter signed by FSC deputy chairperson Ralitsa Againe. The company was notified that its activity was not in compliance with Bulgarian law. The letter said that "the service of paying annuities, or pensions for an indefinite time in the future, after Hild has received the rights over the property of the people involved in the contract, has the characteristics of life insurance services performed by an insurance company, for which Hild has no licence".

In series of TV appearances, Againe said that the FSC's main concern was that no one could exercise control over Hild's activity in Bulgaria and because of this, the rights of its clients were not guaranteed by any state body. If Hild had registered as a life insurance company, then the FSC was in its rights to monitor Hild's activity and if the company got into financial difficulties, then the state could defend the rights of the clients, Againe said. She cited the law saying that every life insurance and insurance company in Bulgaria should have a capital of 6.4 million leva, which serves as a guarantee of clients' rights, while Hild had just 260 000 leva of capital.

Againe also questioned why the properties of Hild's clients were transferred to the company from the moment of the signing of the contract, not after the client's death. Nowhere in the world was it practice to make a retired person sign a contract for conveyance of property to a company, Againe said. To comply with the law, Hild had to change this provision in its contracts, she said.

On November 2, Hild Bulgaria executive director Dilyana Georgieva told a news conference that Hild was not a life insurance or insurance company and she was surprised by the FSC's findings, "since we are not an insurance company but a commercial one, so the FSC has no jurisdiction over us and we see no reason to change our contracts or activity".

It seemed that all the FSC could do was rely on changes in legislation. Againe's personal involvement in the issue paid off since MPs are determined to amend the Insurance Act in a way that will force Hild Bulgaria to register as an insurance company if it wants to continue its work in Bulgaria. In addition to that on November 7 the Commission for Consumer Protection (CCP) issued an order ceasing the broadcasting of all of Hild Bulgaria's advertising. CCP's head Damyan Lazarov told Focus news agency the CCP has been working on signals received by citizens and signals received from Parliament's Economic Policy Committee.

"If the amendments are approved we will follow the law and register as an insurance company," Mariana Georgieva, Hild Bulgaria's media officer, told The Sofia Echo on November 7. "Our position is that at the moment the FSC sent their letter, Hild Bulgaria was following the law. With Merrill Lynch as the majority owner of the mother company, it is not a problem for us to raise our capital to 6.4 million leva."

"What is more interesting for us is how Parliament managed in less than a week's time to organise itself and discuss an amendment that concerns Hild Bulgaria, since it is the only company in the country offering this service so far. We think that the behaviour of Againe is simply unacceptable in this case," Georgieva said.

At the November 2 news conference, Dilyana Georgieva expressed concern about the media campaign that resulted after the FSC letter was made public.

Some Bulgarian newspapers came out with headlines such as "Hild Bulgaria swindles pensioners" and "Another scam gets busted".

The Association of Bulgarian Insurers supported the FSC's findings.

"What Hild offers is nothing but insurance services," Orlin Penev, head of ABI said. Penev said that the biggest threat to Hild's customers was that the customers were transferring to Hild not their inheritance rights over the property, but the property itself.

Georgieva referred to another of Againe's worries. Hild had said in its documents that the company was financially backed by Merrill Lynch and Deutsche Bank London, while the FSC had not been able to confirm this. Georgieva said that the contracts were actually signed by Hild Asset, owned by Hild Bulgaria, which in return was owned by the mother company Hild, registered in Cyprus.

"The mother company registered in Cyprus is majority owned by Merrill Lynch," she said "and this is one of the guarantees for our financial stability. Soon we expect Merrill Lynch to issue an official statement on the issue.

"The rights of the customer once he has transferred the property to us is the contract itself," she said. "In case Hild stops paying the annuity for more than a month, the customer simply gets the property back," she said. "This is written in the contract so it acts as a guarantee."

She was certain that getting back the property to the customer did not require court actions, which is questionable since all disputes over contracts in Bulgaria are referred to court in compliance with the Obligations and Contracts Act.

"We do not need to have a capital of 6.4 million leva because first, we are not an insurance company and secondly, our financial stability is guaranteed by our investors," Georgieva said. "Let's make one thing clear. After they sign the contract our clients preserve their lifelong right to live in their property. It applies to both spouses in case one of them dies."

Since the launch of its activity in Bulgaria, Hild had had 35 contracts signed with many more in process, she said. Georgieva refused to say whether they have already had a customer who had died.

"We prefer not to think in that direction. All statistics say that the average life expectancy in Bulgaria after the age of 65 is 14 years and we hope that our customers will have a long and better life because of us."

The FSC cited in its letter that Hild was under investigation in Hungary for similar activity. "Indeed Hild was fined in Hungary, to pay 51 000 euro, but it had nothing to do with its activity. Hild was fined for misleading advertising by using the word `the best services', nothing more."

Georgieva said at the time that Hild would continue to conduct its business in the way it had done so far, because "we do not think the FSC has any legal power over us since we are not an insurance or any other kind of financial company. We think that Hild provides more than a service to the customers by raising their financial status in the golden years of their lives".

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Hild Group
Set up in Hungary in 2004, Hild launched in early 2005 a product designed for pensioners that enables them to get access to finance on the basis of their fixed property. Later Hild entered the markets in Romania and Bulgaria. John Wirth is its founder and a board member, and Hild's chairman is Geoffrey Woolley. Woolley is the founder and chairman of European Venture Partners, a venture capital fund, and a number of US-based funds including Dominion Ventures. Deutsche Bank has backed Hild's project for pensioners in Hungary. Wirth told The Sofia Echo in April this year that the series of protests by pensioners in the spring about the meagre allocation allowed them by the state was among the main reasons for Hild's arrival in Bulgaria.