“IVASS Freezes Redemption for Eurovita Savers as Bailout Plan is Finalized”

In order not to trigger panic and systemic crises, IVASS took time to allow the actors involved in the rescue to Eurovita to find a definitive solution that definitively calms the waters.

The goal is protect the 350,000 savers got caught up in the insurance company’s crisis after UK shareholders didn’t recapitalize enough. Meanwhile, confidence in the insurance sector is starting to waver.

Redemption freeze until July 31st

In detail, IVASS allegedly granted the redemption freeze of life policies for another month, i.e. until July 31st, because the bailout, according to Il Sole 24 Ore, would be imminent and it is in the interest of the entire insurance system that it be concluded under the best conditions for all the players involved, savers included. The extension would in fact be subject to the presentation by IVASS of a sufficiently detailed and “guaranteed” bailout plan, which would make savers digest the bad news.

Therefore, according to the Salmonato newspaper, there would be a general agreement between the insurance and banking worlds, but the credit institutions involved would have asked for some “small corrective conditions”, a sort of last mile, for perform a rebalancing of charges and to make the operation more balanced, from their point of view.

The counter-proposal of the distributors of Eurovita policies to the big insurance companies

The five banks most involved in the distribution of the products of the company that ended up in extraordinary administration entrusted to Alessandro Santoliquido (i.e. FinecoBank, Fideuram, Credem, Sparkasse and Intesa) would have made a counter-proposal to the insurance world. To support them would have joined realities such as the Cassa di Risparmio di Volterra, the Banca Popolare Puglia e Basilicata, the Iccrea Group and Cassa Centrale to which many CCBs and savings banks involved refer, but also Banca Profilo and Banca Consulia, just to name a few. .

According to what Il Sole 24 Ore reports, after several meetings held in the last ten days, there would have been two decisive ones on Wednesday 24 May in the evening and Thursday 25 May, when all the bank representatives met. Just after this last meeting the response to the placement banks’ draft agreement (the most exposed) with a weight of over 90% of the total number of policies.

The Eurovita bailout scheme

The rescue scheme provides a splitting up of Eurovita into five company branches, which would be sold to Generali, Poste Vita, Intesa Sanpaolo Vita, Unipol and Allianz, ready to take over the portfolio dividing it equally. And with the placers who should take charge of any redemptions from customers. As? Anticipating the liquidity necessary to reimburse the policyholders the surrender value of the policies (which would be the work of the incoming company) and receiving in exchange the securities underlying the insurance contract (which are often capital losses) to manage them with due patience.

Now the banking groups are waiting for a response from the companies to their revised plan and essentially hope that their new proposal will be accepted and that the big names in the policies will sit down at the table to find the final compromise, by the end of May, so that each bank can then submit the hypothesis of an agreement to their Boards. The adjustments requested “in a constructive way” seem to concern in particular the surrender node (which may not be few) on which a greater balance is requested, to make the hypothesis more digestible even for small and medium-sized banks.

The point of view of savers

The important thing, as the consumer representatives also point out, is that we arrive at a quick deal: Redemption freeze lasts until June 30th. IVASS could grant another month (or two) only on condition that everything is planned and there are certain commitments on the general plan. But time is running out.

In the meeting of 7 June with Commissioner Santoliquido, the associations, starting with Adiconsum and Federconsumatori, will ask to know in detail the composition of the segregated accounts of Eurovita to evaluate its danger and possible losses.

On the table there is also a proposal from the First CISL, put forward ten days ago, which essentially asks for a Guarantee fund, on the FITD banking model, with a bond of solidarity between the insurance companies for the policies. Other associations have already said they are in favor, to avoid new Eurovita cases in the future.

When the rescue is completed, it will also be necessary think about the model of some policies. Consumer organizations believe that the sale of Italian, French and German government bonds, in times of high interest rates, took place with a view more to the interests of shareholders than customers and that some mechanisms need to be addressed.

While for Absoluteusers, “the integration of IVASS into the Bank of Italy has weakened the supervision and control of the two sectors, without creating positive synergies for policyholders, account holders and businesses“. In reality, if Eurovita’s mixed bank-insurance scheme goes through, it would seem to prove exactly the opposite.