Insurance, who trembles with Eurovita
The latest news on the Eurovita insurance company in extraordinary administration. The article by Emanuela Rossi
A few more months to save Eurovita, the insurance company owned by the English fund Cinven since 2015 which has been without a board of directors and statutory auditors since the end of January – suspended by IVASS – and which has been under extraordinary administration since the end of March under the guidance of Alessandro Santoliquido.
THE CURRENT SITUATION
On 29 March, in fact, the Ministry of Enterprise and Made in Italy, on a proposal from IVASS, ordered, as expected, the extraordinary administration and the dissolution of the bodies with administration and control functions vis-à-vis Eurovita Holding and Eurovita. Alessandro Santoliquido has been appointed commissioner for extraordinary management. The supervisory committee that will accompany Santoliquido in the recovery process has also been set up: Antonio Blandini as president, Sandro Panizza and Monica Biccari as members.
The following day, the Insurance Supervisory Institute extended until 30 June next the suspension of the surrenders of the insurance and capitalization contracts stipulated with Eurovita, which had been ordered in February. In recent days, as reported by the Sole 24 Ore , meetings of a "mainly informative" nature are being held with the banks involved who will be presented with the project.
SOME NUMBERS
As reported in Panorama on newsstands, 353,000 Eurovita customers have taken out policies worth 15.3 billion. A significant figure, higher “than all the great crashes in the history of Italian savings. More than the 12.1 billion euros of Argentine Tango bonds, the Parmalat hole, the 11 billion euro countervalue of the shares of the two Veneto banks, Popolare Vicenza and Veneto Banca, sold to account holders as 'safe' products and canceled by the mismanagement of the two institutes".
The Eurovita bubble burst last September, when IVASS asked to recapitalize the company, which in the meantime had reached the minimum Solvency II threshold. As of June 30, 2022, the latest data available, the index was already at 117 percent. It should be remembered that the average of Italian insurance companies has a Solvency II ratio of 230 per cent, an indicator that for Eurovita it has been around 150 per cent lower for years.
THE HYPOTHESIS TO BE STUDIED FOR THE RESCUE
At the moment, according to the reconstructions provided by the Sole 24 Ore , there is an operation on the table that has received a general go-ahead at both an institutional and government level. The central point, however, would be the amount of the liquidity injection needed to bring Eurovita back to an adequate Solvency, around 150%: the total figure would be equal to 400 million, of which 100 million – already paid – to be paid by Cinven, 100 million from the distributing banks, namely Fideuram, Fineco, Credem and Sparkasse, 200 million from the insurance sector, including Generali, Intesa Sanpaolo Vita, Poste, Unipol and Allianz. A loan would also be added – a sort of "safety net" to finance the redemption of customers' policies at the end of the receivership – which in recent days, according to the Confindustria newspaper, have considered the possibility of activating a credit line about 2 billion.
The hypothesis described up to now, which would certainly have the advantage of involving more subjects in the burden of the rescue, could however present criticalities that are difficult to overcome, starting with governance. Another aspect "perhaps even more relevant", highlights Il Sole , is the fear that the whole operation "could turn out to be a black hole" because – once the company is secured – it would trigger the release of the redemptions of the policies, currently frozen by the Ivass. And here little rosy scenarios could open up, especially if there was an escape by the contract holders. In short, there may again be a need to dig into the wallet. Without forgetting that the distributing banks will provide a loan with a rate close to 4%, an important figure also for the insurance companies in favor of a system solution.
THE ALTERNATIVE PLAN
For this reason, according to Il Sole 24 Ore , given the difficulty of the project on the table, a plan B is also being studied which "would still see the involvement, albeit with different roles, of the subjects already called into question" and which "would give certainty to clientele". In the past, a possible spin-off of unit-linked policies was also hypothesized on the market (which would be transferred to the distributing banks, given the greater similarity with banking products), while the separate management policies would remain with the incoming insurance companies: This solution, however, has never found favor with the insurance world. In this regard, the next few days will certainly be crucial to understand which path will be taken to avoid the liquidation of the company that ended up in extraordinary administration on March 31st. Pulling the strings is the current commissioner, Alessandro Santoliquido. At stake, it should not be forgotten, are over 400,000 customers for a total of 1 billion in premiums to which 15 billion in reserves refer, of which 9 billion linked to separate management and 6 billion to unit linked.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/assicurazioni-chi-trema-con-eurovita/ on Sun, 16 Apr 2023 05:23:33 +0000.