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Insurance coverage group Zurich’s sale of a $20bn life insurance coverage guide to Viridium has collapsed, with the non-public equity-backed German consolidator citing “concerns regarding [its] present possession construction” as regulatory scrutiny of such offers intensifies.
Zurich, one in all 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 lowering 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 result of concerns regarding Viridium’s present possession construction”, including: “We remorse this because the transaction would provide clear advantages for patrons.”
Viridium is majority owned by a fund operated by British non-public 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 sooner or later”, including that the deal collapse didn’t have an effect on its monetary targets or capital administration plans.
Regulatory scrutiny of the particular dangers introduced by non-public 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 result of issues over the possession of life insurance coverage obligations by means of a non-public fairness fund, in accordance with individuals briefed on the matter.
In keeping with the individuals, BaFin had been carefully watching the occasions in Italy and famous that Cinven didn’t present the extent of economic backing to Eurovita requested by native regulators.
An individual conversant in Cinven’s place stated it did contribute important 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’d have [had] a distinct possession construction, we’d have accomplished the deal,” the particular person stated.
Personal capital corporations have swept into the life insurance coverage sector because the 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 example 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, slightly than a balance-sheet funding by a non-public capital group.
This story has been amended to appropriate a reference to the proprietor of Eurovita.