“This will be extremely painful”
German insurers have billions on fire at Signa
December 12, 2023, 3:33 p.m
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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 significant portion should not be covered by collateral.
The chaos surrounding the insolvent Signa Holding is leaving its mark on the financial industry. As the “Financial Times” reports, citing insiders, the Signa Group not only received loans from financial institutions such as Julius Baer and Unicredit, but also relied heavily on financing from more than half a dozen insurers.
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As can be seen from documents that the newspaper was able to see, corporations such as Munich Re and Allianz invested a total of three billion euros over the years in real estate projects of René Benko’s now seriously ailing empire. Explosive: Around a third of the commitment should not be covered by collateral. “This will be extremely painful for some insurers,” the paper quoted one of its sources as saying. It is not stated which insurers have granted loans that are not adequately 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 information, the insurer is said to have given Benko’s real estate empire almost a billion euros in credit. The company declined to comment on the extent of its commitment to ntv.de, but explained that the investments were “largely” “loans secured by mortgages in prime locations in some of Germany’s largest cities.” They are “adequately secured at height”. “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 Signa loans. According to FT, these are loans worth around 700 million euros and 500 million euros, respectively. Allianz, Germany’s largest insurance giant, is said to have provided loans of over 300 million euros for Signa’s purchase of a high-rise building in Berlin in 2018. The newspaper does not say how much of this has been repaid so far.
According to the FT, all companies declined a request for comment. Inquiries from ntv.de to Ergo and Allianz were also rejected citing confidentiality and speculation. Industry insiders told ntv.de that the insurance industry’s investments were expressly loans, not risky private equity deals. For the most part, the loans are secured by appropriate properties. At least some of them would even exceed the loan amount today. However, the experts cannot rule out the possibility that individual insurers have still speculated.
Bafin: Totals not critical “in most cases”.
German financial regulator Bafin told the FT it was monitoring the situation. However, she does not currently see a significant threat to companies, also because the risk is “in most cases” negligible compared to the total assets of the individual insurers.
Insurance companies have been in demand as alternative sources of money in the past, primarily because of 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 during times of extremely low interest rates,” the newspaper quoted an insider as saying.
The umbrella company of the extensive Signa Group includes, among others, 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 worth five billion euros, most of it reportedly in the first nine months of this year. Last month, Signa Holding filed for bankruptcy.
The total extent of the debt has not yet been fully disclosed. Insiders who are familiar with the company’s structure expect it to be double this amount. Further bankruptcies in the Signa empire are expected this week.