Insurers and banks agree on multi-billion deal to rescue Eurovita

A number of insurance coverage corporations and banks have agreed on a multi-billion deal to rescue Italian life insurer Eurovita, reported Reuters.

Brokered by Italian insurance coverage regulator IVASS, the deal will see Generali, Intesa Sanpaolo Vita, Poste Vita, UnipolSAI and Allianz set up a brand new firm.

The newly fashioned entity will assume Eurovita’s life insurance coverage insurance policies.

The Italian firm was positioned beneath administration by IVASS earlier this yr.

In accordance with a supply aware of the scenario, roughly €10bn ($10.89bn) in insurance policies—or roughly two-thirds of Eurovita’s complete property on the finish of 2022—can be moved to the brand new entity.

The corporate’s woes function a reminder of the hazard that life insurers face from rising rates of interest, which depreciate the worth of the federal government bonds these companies bought with their prospects’ cash.

Rising rates of interest have pressured many small savers to cancel their plans and reinvest their cash to get returns, forcing insurance coverage corporations to promote the bonds at a loss.

Eurovita’s points have been made worse by poor threat administration and Cinven’s reluctance to enhance capital, in line with IVASS.

After appointing a particular commissioner to supervise Eurovita earlier this yr, IVASS put a freeze on early redemptions.

Whereas the specifics of the rescue deal are being finalised, the freeze has been prolonged till 31 October 2023.

When Eurovita shoppers redeem their insurance policies, the 25 lenders collaborating within the rescue will finance the fee whereas preserving the underlying bonds till maturity and offsetting any losses.

The supply estimated that this financing is price €6bn ($6.54bn).

Collaborating banks embrace Credit score Agricole, Banco BPM, BPER, FinecoBank, Intesa Sanpaolo, Mediobanca, and Monte dei Paschi.