A court in Frankfurt has ruled against the German Supervisory authority’s, BAFin’s, objections to the sale of the Gerling group’s reinsurance operations, Gerling Globale Re, to Globale Management GmbH (GMG), an investment group headed by former insurance executive Achim Kann.
BAFin had objected to the sale in February on the grounds that GMG was insufficiently capitalized to assume Gerling’s reinsurance liabilities. In summary proceedings the administrative court ruled that the action was unlawful, as there were no legal grounds to support the prohibition. So far the regulator hasn’t indicated whether it intends to appeal the decision.
As a result Gerling, which had previously announced plans to sell both its life and P/C reinsurance operations, is free to pursue its deal with GMG. The reinsurance units are essentially in runoff, and have written no new business since October 2002. Gerling recently announced a 300 million Euro ($325 million) net loss for 2002. The reinsurance units lost an estimated 170 million Euros ($185 million). Gerling has sought permission to transfer an additional 200 million Euros ($217 million) from its reserve fund to shore up the unit’s capitalization.
It intends to go ahead with its plans to sell the units. “The deconsolidation of the reinsurance Group now beginning to take shape will give the Gerling group more freedom to take action and greater planning safety,” said Björn Jansli, Executive Board Chairman in a written statement.
The court’s decision could influence regulators in other countries as well, particularly the U.S. and the U.K. “The Gerling Group believes that this decision in its favour will have a signalling effect for foreign supervisory bodies as well,” said a company statement.
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