Eurovita, 15 billion bailout for the 353,000 holders of Corriere.it policies

Five large insurance companies, about thirty distributing banks and six lenders of last resort. They are the protagonists of the system operation that will lead to the rescue of Eurovita, a company under extraordinary administration with a portfolio of 15 billion, made up of 413,000 policies held by 353,000 customers. Due to the size and number of stakeholders, the plan required months of negotiations, orchestrated by the consultant Vitale. In the end, under the auspices of Ivass, the Bank of Italy and the government, the balance was found and should be made official today by Commissioner Alessandro Santoliquido, who took over the management of Eurovita in March after the failed recapitalization by the controlling shareholder, the British fund Cinven.

The rescue scheme

Net of the final details to be filed, the scheme envisages the creation of a new company where the assets of the company and the 230 employees will converge. With an investment of 500 million, the five largest companies in the country will become shareholders – Generali, Intesa Vita, Poste Vita, Unipol and Allianz – which will then divide up the customers in proportion to the presence on the market of the policies sold by Eurovita. The solidity of the insurances involved should avoid the risk of massive redemptions which, moreover, will not be allowed immediately but only once the process of the rescue operation has been completed, probably in September. In the event, however, a multi-level liquidity bank has been built. The first lies in the residual availability of Eurovita. Secondly, the financing of the distributing banks would intervene. Lastly, beyond a certain redemption threshold, a group of six institutions, made up of Intesa Sanpaolo, Bpm, Bper, Mps, Crdit Agricole and Mediobanca, would act as lender of last resort.

The redemption issue

The hope that the announcement of the bank-insurance shield could work as a self-fulfilling prophecy: that the tranquility of being able to redeem will convince customers not to do so. The liquidity would in any case allow the companies to bring to maturity policies whose underlying are bonds with a high credit rating and therefore with excellent repayment probabilities. On the contrary, their immediate liquidation would lead to the crystallization of the depreciation suffered by the securities on the market due to the rise in interest rates and the consequent increase in the yields of the newly issued bonds.

The protection of policies

Beyond its happy conclusion, the Eurovita affair is giving rise to some reflections among insiders. The first concerns the opportunity to create a system of protection for the capital of life policies similar to the one existing for bank deposits of up to 100 thousand euros. The provision of the mechanism would make it possible to institutionalize the system rescue, avoiding any danger of a domino effect and a ransom race. The second consideration pertains to the role of private equity funds in regulated and delicate sectors such as the insurance sector. moreover, it was precisely the failure to recapitalize by Cinven that triggered the Eurovita crisis.