Fears for billions: Benko risks of German insurers even greater than known

Crisis at Signa - Fears for billions: Benko risks of German insurers even greater than known

For years, German insurers were among the most important financiers of René Benko's Signa Group, including the who's who of the industry: companies such as Ergo, Signal Iduna and R+V. Signa insiders were already reporting "huge tickets" of loans in the fall - even before the wave of insolvencies in Benko's empire really began to roll in and also hit his most important real estate companies shortly after Christmas.

It has now emerged that the German insurance industry's involvement in Benko's conglomerate was even more extensive than previously known - and so were its risks. This emerges from a recent answer from the Federal Ministry of Finance to a parliamentary question. To the knowledge of the financial supervisory authority Bafin, 46 insurance companies were "exposed to the Signa Group", according to the letter to Jessica Tatti (non-attached, formerly of the Left Party), a member of the Bundestag, which is available to Capital.

For nine of the insurers concerned, the exposure to Benko's group accounts for more than one percent of their investment portfolio, writes State Secretary of Finance Florian Toncar (FDP). The peak value is 2.2 percent. In this case, an insurer has invested more than two percent of its assets in Benko and must worry about repayment after the bankruptcy of significant parts of the group. However, Bafin does not consider any of the Signa lenders from the insurance industry to be a "significant threat", emphasized Toncar. The Ministry of Finance did not provide any information on the total amount of the industry's exposure or the insurers affected.

Signa slippage also affects cultural workers

In addition, two federal pension schemes are also affected by the Benko conglomerate's imbalance, as the Ministry of Finance admitted. These are the Versorgungsanstalt der deutschen Bühnen (VddB) and the Versorgungsanstalt der deutschen Kulturorchester (VddKO). Both institutions "are among the financiers of three properties in which Signa companies are involved", State Secretary of Finance Toncar replied to a further question from MP Tatti.

However, these real estate financings were "extensively secured with first-ranking land charges". Furthermore, the institutions are also invested in a special real estate fund that is the buyer of a Signa property currently under construction. Overall, however, the exposure of the two pension funds amounts to less than one percent of their capital investments, Toncar wrote in his response at the end of December, which is available to Capital.

Benko's involvement in the two federally owned pension institutions came about via a detour: VddB and VddKO have their assets managed by Bayerische Versorgungskammer (BVK). BVK, in turn, is one of the German investors that has maintained a close and capital-intensive business relationship with Benko for years. According to Capital information, BVK granted loans some time ago for the luxury department store KaDeWe in Berlin, the Tyrol department store in Innsbruck and the Park Hyatt luxury hotel in Benko's Golden Quarter in Vienna, which run until the 2030s. The KaDeWe is worth 450 million euros, while the properties in Austria, which were among real estate investor Benko's first major projects, are worth more than 100 million euros each.

The Bavarian Ministry of the Interior recently pointed out to Tim Pargent (Green Party), a member of the Bavarian state parliament, that "the market values of all Signa properties financed by BVK significantly exceed the loan amounts". However, the question is to what extent the values calculated to date can be realized on the market given the chaos at Signa. Following the insolvency filings of central Signa companies, some properties will have to be sold within a short period of time in order to bring money into the empty coffers - possibly with consequences for prices.

In December, the "Financial Times" estimated the German insurance industry's commitment to the Benko Group at more than 3 billion euros. The report spoke of more than half a dozen companies that have financed the Tyrolean real estate investor's conglomerate, including almost all the well-known industry giants such as Allianz, the Munich Re subsidiary Ergo, R+V and Signal Iduna. However, the number of 46 insurers who, according to Bafin findings, have risks from commitments to the Signa Group indicates that many smaller companies from the German insurance industry have also become involved with Benko.

"The extent is gradually becoming apparent"

"The extent of the Signa fiasco is gradually becoming visible," said Christian Leye, a member of the Bundestag, who was the economic policy spokesman for the Left Party parliamentary group until it was dissolved and is now vice-chairman of the BSW (Sahra Wagenknecht Alliance) association. "But it should come as no surprise that the German insurance industry has succumbed to the allure of the alleged model entrepreneur Benko. After all, even the current German Chancellor Olaf Scholz has backed Benko in the past despite all the warning signs." Leye added that it was questionable whether the Signa bankruptcy was solely a matter of insolvency law. The political dimension is also highly explosive, for example with regard to the commitment of the then Mayor of Hamburg, Mr. Scholz, to the Signa prestige project Elbtower: "Does Mr. Scholz have other skeletons in his closet?" asks Leye.

Insurers also affected by recent insolvency applications

Back in November, Capital reported on how Benko had been able to rely heavily on German state banks, insurers and pension funds for his immense need for capital over the years. These were primarily loans for real estate projects with long maturities, but also profit participation certificates and other financial instruments. During the long period of zero interest rates, the returns that Benko promised his lenders in the real estate sector also appeared attractive to institutional investors who were not allowed to take on major risks. Many of the loans are collateralized with land and real estate, while other investments are not.

In addition, individual insurers also invested equity in significant - now insolvent - Signa companies: R+V Versicherung, for example, holds five percent of the shares in each of the two most important real estate subsidiaries, Signa Prime Selection and Signa Development Selection. Competitor LVM recently held a 2.9 percent stake in Signa Prime Selection. Last week, both Signa subsidiaries filed applications for restructuring proceedings under self-administration with the Vienna Commercial Court. The management intends to continue operating the companies. However, it is clear that they will have to sell real estate and development projects on a large scale and will shrink in any case - with corresponding consequences for the value of the shares.

Most Signa financiers from the insurance sector did not want to comment on their involvement when asked by Capital. Signal Iduna, which according to the Financial Times is said to have lent the group almost 1 billion euros, pointed out in response to an inquiry that its loans were secured by mortgages. The Dortmund-based insurer emphasized that it "currently does not expect any loan defaults" at the Signa Group. But even in the event of "possible loan defaults", the company does not currently see any "significant risks" for its own company. Among other things, Signal Iduna is involved as a lender in Benko's prestigious Elbtower project in Hamburg.

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