Zurich’s sale of $20bn life insurance coverage guide to PE-backed group collapses

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Insurance coverage group Zurich’s sale of a $20bn life insurance coverage guide to Viridium has collapsed, with the personal equity-backed German consolidator citing “concerns regarding [its] present possession construction” as regulatory scrutiny of such offers intensifies.

Zurich, certainly one of Europe’s largest insurers, struck a deal to promote its German legacy life insurance coverage again guide — together with annuity and endowment merchandise — to Viridium in 2022. The sale was a key step in decreasing the group’s publicity to rates of interest, Zurich stated on the time.

In an announcement on Tuesday, Viridium stated the transaction “is not going to proceed as deliberate as a consequence of concerns regarding Viridium’s present possession construction”, including: “We remorse this because the transaction would provide clear advantages for purchasers.”

Viridium is majority owned by a fund operated by British personal fairness agency Cinven, alongside minority buyers Hannover Re, the reinsurer, and Italy’s Generali.

Zurich stated it was “dedicated to discovering an answer for this portfolio and can discover choices in the end”, including that the deal collapse didn’t have an effect on its monetary targets or capital administration plans.

Regulatory scrutiny of the particular dangers offered by personal fairness possession of life insurance coverage corporations has climbed, after Italy’s Eurovita — one other life insurer majority owned by means of Cinven funds — was taken into particular administration final yr following a capital shortfall. 

Germany’s monetary watchdog had been poised to shoot down the transaction as a consequence of considerations over the possession of life insurance coverage obligations by means of a non-public fairness fund, in response to folks briefed on the matter.

In response to the folks, BaFin had been intently watching the occasions in Italy and famous that Viridium didn’t present the extent of monetary backing to Eurovita requested by native regulators. 

An individual conversant in Cinven’s place stated it did contribute vital capital to Eurovita and performed a task to find an answer for the enterprise.

An individual conversant in Viridium’s place stated the enterprise was money generative, with a robust steadiness sheet. “If we might have [had] a special possession construction, we might have accomplished the deal,” the individual stated.

Personal capital companies have swept into the life insurance coverage sector for the reason that monetary disaster, shopping for insurers and scooping up books of capital-intensive enterprise that conventional insurance coverage teams have been eager to dump in a interval of low rates of interest.

In a paper final yr, the IMF warned of potential “contagion” to different components of the monetary system from the rise in PE-linked life insurers. It cited Eurovita for instance of the dangers.

Insurance coverage executives have additionally highlighted the chance of a misalignment of pursuits between the long-term nature of this insurance coverage enterprise and the shorter timeframe of possession by means of a PE fund, fairly than a balance-sheet funding by a non-public capital group.

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