A crisis at a small Italian insurer has rekindled concerns about the effect of rising rates. The rapid collapse of Silicon Valley Bank earlier this year was largely down to an ill-advised bond portfolio and liabilities that were less sticky than assumed. While Italy’s Eurovita isn’t a bank, its demise has some similarities with events across the Atlantic.
. The guarantees should encourage them to stick around. But the banks are likely to lose money if redemptions start again once a current freeze is lifted.
Size-wise, Eurovita was not huge. And it’s unlikely that much larger, more diversified players will get into trouble in the same way. While Generali’s General Manager Marco Sesana told an analyst call the group had experienced moderate redemptions of certain life products distributed via banks in the first quarter this year, the situation had already improved in April and May.
Still, Eurovita offers a lesson. Crises can flare up in unexpected corners. If European regulators weren’t already on the lookout for future SVBs, they should be now.Italy’s top four insurers and Germany’s Allianz have agreed a multibillion-euro rescue deal for ailing life insurer Eurovita, industry supervisor IVASS said on June 30.
The accord was brokered after months of work. The deal also involves banks that sold the insurance products through their networks.Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
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