Thursday, 15 December 2011
Groupama raises €300m to boost finances as Solvency II delayed again
It seems that insurers and captive owners will have to wait even longer for clarity on the exact requirements of Solvency II following the receipt of an update from the European Parliament this week that reveals that Omnibus II, the Directive needed to clarify key details required for implementation of the capital adequacy and reporting rulebook for insurers, has been delayed again.
Accounting firm KPMG said that the European Parliament is not now planning to vote on the final rules until April 2012. This means that insurers and captive owners will have to wait even longer before detailed guidance on implementation is issued and have even less time to implement it.
Janine Hawes, a director in KPMG’s Solvency II technical group, commented: “This is another blow to the insurance industry, significantly shrinking the timeframe between final rules being issued and the industry having to comply. These latest delays mean the industry will be forced to spend another four months in the dark and in many respects defeats the purpose of the 12 month implementation delay.”
Ms Hawes continued: “Again, insurers are facing looming deadlines without sufficient time to get their heads around the final rules. Solvency II on its own is a huge undertaking for insurers and the fact that deadlines have kept slipping has further complicated matters. Regulators have been unable to provide certainty and the lack of guidance is a huge problem. The industry has been crying out for clarity on critical technical issues, such as matching and counter cyclical premiums. These latest delays make it seem no one is listening.”
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Meanwhile over in Paris, French insurer Groupama has signed a deal with state-owned bank CDC that will result in the injection of €300m of fresh capital, as the embattled mutual insurer tries to avoid missing minimum solvency requirements sparked by the expected requirements of Solvency II before the year is over.
It became clear that, as a result of Groupama’s deal, it will cede to Caisse des Dêpots et Consignations its stake at Silic, a property management firm widely seen as one of the most attractive assets owned by the insurance group.
The agreement has been presented as an alliance between Silic and Icade, a rival firm owned by CDC.
In a first step, in exchange for 6.5% of Silic's shares, Groupama will receive a 2.7% stake at Icade, in an operation that should be completed before the year is over. On a later, unspecified date, Groupama will transfer to CDC its whole 44% stake at Silic.
At the same time, CDC has agreed to buy €300m in preferred shares issued by Gan Eurocourtage, a subsidiary of Groupama that focuses on non-life insurance for small and medium companies and local governments.
Caisse des Dêpots owns a 40% stake at CNP Assurances, a large player in the life insurance market in France.
The solvency situation of Groupama has been under the spotlight in the past couple of months as the firm's investment portfolio has been affected by the Eurozone sovereign crisis and the fall of equity prices.
It is feared that the mutual insurer will find itself below the level of capital legally required, which could trigger actions from the financial authorities.
On 9 December, Standard & Poor's announced that it was placing Groupama's BBB rating on a negative watch because of the possible weakening of its financial profile.
S&P believes that the firm's portfolio will suffer a hit with an expected 50% impairment of Greek government bonds, which represented 7.8% of Groupama's shareholder funds by the end of June.
It also expressed concerns about the exposure of Groupama to securities issued by French banks, which have also been put under watch by credit rating agencies of late.
The rating agency said that it should perform further revisions of Groupama's solvency position once the strategic changes announced by the firm in November can be assessed.
As a result of its recent troubles, Groupama has replaced its CEO and other top managers. On the other hand, S&P had also indicated that a successful conclusion of the negotiations with CDC for the sale of Groupama's stake at Silic will influence its rating.
“Both transactions will reinforce the financial strength of Groupama,” said Thierry Martel, the CEO of Groupama, as the agreement was made public. The deal still requires the approval of France's competition authorities.
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