German insurers have billions in the fire at Signa
German insurance groups, including Allianz and Munich Re, could face risks due to the collapse of René Benko's Signa Holding. According to a report, the entire industry has lent Signa a total of three billion euros. A considerable amount is said not to be covered by collateral.
The chaos surrounding the insolvent Signa Holding is leaving its mark on the financial sector. As the "Financial Times" reports, citing insiders, the Signa Group not only received loans from financial institutions such as Julius Bär and Unicredit, but also relied heavily on financing from more than half a dozen insurers.
According to documents seen by the newspaper, groups such as Munich Re and Allianz have invested a total of three billion euros over the years in real estate projects of René Benko's empire, which is now in dire straits. The explosive fact is that around a third of the exposure is not covered by collateral. "This will be extremely painful for some insurers," the newspaper quotes one of its sources. It does not say which insurers have granted loans that are not sufficiently secured.
The companies that have lent money to Signa include Dortmund-based Signal Iduna, a medium-sized company with a total of twelve million customers. According to newspaper reports, the insurer is said to have given Benko's real estate empire a loan of almost one billion euros. Although the company declined to comment to ntv.de on the extent of its involvement, it explained that the investments "largely" involved "loans secured by mortgages in prime locations in some of Germany's largest cities". They are "adequately secured in terms of amount". "Significant loan defaults" are not expected.
Ergo Versicherung, which belongs to Munich Re, and R+V, Germany's fourth-largest insurance group, are also said to have granted loans to Signa. According to the FT, these loans amount to around 700 million euros and 500 million euros respectively. Allianz, Germany's largest insurance giant, is said to have provided loans of 300 million euros for the purchase of a high-rise building in Berlin by Signa in 2018. The newspaper does not say how much of this has been repaid so far.
According to the FT, all companies declined requests for comment. Inquiries by ntv.de to Ergo and Allianz were also rejected with reference to confidentiality and speculation. Industry insiders told ntv.de that the investments by the insurance sector were explicitly loans, not risky private equity deals. For the most part, the loans were secured by corresponding properties. At least in part, they would even exceed the loan amount today. However, the experts cannot rule out the possibility that individual insurers have nevertheless speculated.
Bafin: Sums not critical "in most cases"
The German financial supervisory authority Bafin told the FT that it is monitoring the situation. However, it does not currently see a significant threat to the companies, partly because the risk is "in most cases" negligible compared to the total assets of the individual insurers.
In the past, insurance companies were in demand as alternative sources of funding, primarily due to the regulatory and interest rate environment. "Heavily regulated banks were unable or unwilling to carry out certain types of transactions, while insurance groups were drowning in cash in times of extremely low interest rates," the newspaper quotes an insider as saying.
The umbrella company of the widely ramified Signa Group includes the luxury department stores KaDeWe in Berlin and Selfridges in London as well as the Chrysler Building, the legendary skyscraper in New York. By the end of September, the holding company had accumulated debts amounting to five billion euros, the majority of which were allegedly incurred in the first nine months of this year. Last month, Signa Holding filed for insolvency.
The total extent of the debt has not yet been fully disclosed. However, insiders familiar with the company's structure are likely to reckon with double this amount. Further insolvencies in the Signa empire are expected as early as this week.
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- In the aftermath of Signa Holding's insolvency, Munich Re and Allianz, along with other unnamed insurers, are reported to have collectively invested over 3 billion euros in real estate projects led by René Benko, potentially leaving a considerable portion uncollateralized, leading to potential financial losses for some of these insurers.
- In a similar vein, medium-sized insurer Signal Iduna, which boasts over 12 million customers, is also said to have extended a loan of nearly one billion euros to Benko's real estate empire, albeit claiming that the investments are adequately secured by mortgages in prime city locations and not expecting any significant loan defaults.
- Furthermore, Ergo Versicherung, a subsidiary of Munich Re, and R+V, Germany's fourth-largest insurance group, have granted loans of around 700 million euros and 500 million euros, respectively, to Signa, while Allianz itself provided loans of 300 million euros for the acquisition of a high-rise building in Berlin by Signa in 2018, though the level of repayment remains undisclosed, as do the specific details of other insurance companies' exposure to Signa's financial woes.
Source: www.ntv.de
