German Insurance Titans Tangled in René Benko's Signa Saga
German insurance giants, including Munich Re and Allianz, have plowed more than three billion euros into billionaire René Benko's real estate empire, Signa. Benko's Signa Group network of companies has turned to banks like Julius Baer and Unicredit for loans and financing, but they've also relied on financial support from a host of German insurers, according to Financial Times (FT) documents and insider sources. A considerable portion of this exposure lacks any tangible collateral, and one source cautioned, "This will be extremely painful for some insurers."
Signa Holding, the organization that oversees prized properties like Selfridges in London, the Chrysler Building in New York, and KaDeWe in Berlin, filed for bankruptcy in October 2023. By the end of that year, the company had amassed a staggering five billion euro debt mountain, with the majority of it accrued in less than nine months.
More Insolvencies on the Horizon
Benko failed to provide a full account of the total debt incurred by companies within the Signa group, but according to informed sources, individual companies may owe more than double what they've publicly disclosed. This indicates that further insolvencies could soon materialize within the group.
Insurance Companies Fueled Financing Ardor
Insurance companies lent Signa money in part due to the regulatory and interest rate environment, according to a source familiar with the situation. According to regulatory requirements and low-interest rates, heavily regulated banks were unable or unwilling to engage in certain types of business, leaving insurers with ample capital to fulfill these needs.
Insurers in the Fray
Signal Iduna, a Dortmund-based insurer with twelve million clients and a focus on health and life insurance, lent Signa almost one billion euros, according to sources familiar with the matter. This Dortmund-based insurer wouldn't disclose loan details but confirmed that its exposure was primarily secured by real estate assets in prime German city locations, minimizing the threat of significant credit losses.
Key Players
Munich Re's main insurance business, Ergo, provided loans amounting to around 700 million euros, while German insurance giant R+V extended 500 million euros in unsecured loans to Signa Company. Allianz leveraged its financial resources to grant 300 million euros in loans, while the mid-sized insurer Volkswohl Bund from Dortmund pledged 250 million euros for Signa's Berlin high-rise acquisition in 2018.
Insiders Remain Silent
Ergo, R+V, Allianz, and Volkswohl Bund declined to comment on their loan arrangements with Signa. Signa did not respond to a request for comment on the matter.
Bafin Oversees Without Concern
Germany's financial regulator, Bafin, acknowledged monitoring the situation but downplayed the risks. The regulator concluded that for most affected insurers, the risk was negligible compared to their total assets.
Mixed Bag of Exposures
Additionally, mid-sized German insurer LVM holds a 2.9% stake in Signa Prime Selection, one of the Signa Group's two major asset holders, according to enrichment data. A significant portion of LVM's 300 million euro exposure remains unsecured, a fact that the company has yet to address.
Sources: ,
In the financial drama that unfolded, German insurance companies like Munich Re and Allianz found themselves in the deep end of Benko's troubled waters. The insolvency and high debt levels at Signa Group have posed significant financial challenges for these companies. Potential losses, increased credit risk, regulatory scrutiny, and a complex recovery process stand to impact their overall financial stability.
