Zurich Insurance’s plan to transfer the Zurich Life Legacy back book in Germany to Viridium Holding has collapsed, after Viridium withdrew from the deal.
The transaction, announced in June 2022, involved the transfer of $20bn of net reserves, predominantly from annuity and endowment products.
Despite this setback, the Swiss insurance group said it remains dedicated to resolving the future of the portfolio and will consider other options in due course.
Zurich has confirmed that this development will not impact its financial targets or capital management strategies.
In a statement, Viridium said: “The acquisition of an insurance portfolio of Zurich Group Germany by Viridium will not proceed as planned due to considerations relating to Viridium’s current ownership structure.”
Viridium is majority owned by London-based private equity investor Cinven.
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As per Reuters’ report, regulatory apprehensions, particularly from German regulator BaFin, may have contributed to the deal’s failure.
BaFin’s reservations likely stem from Cinven’s management of Eurovita, an Italian life insurer that faced challenges last year amidst rising interest rates.
Sources said that the German regulator signalled its intention to block the transaction, prompting Viridium’s exit from the deal.
After acquiring Eurovita in 2017, Cinven faced a situation where the insurer’s capital requirements were significantly higher than the funds Cinven had invested to address the deficit.
To prevent a disorderly liquidation, Cinven agreed to repurchase €160m ($173.44m) of Eurovita’s debt.
This sale could potentially remove the obstacles that have hindered the Zurich deal, possibly allowing for its revival in the future.
Both BaFin and Cinven declined to comment on the news.