A German insurance company with exposure to almost €75 million in reinsurance contracts in the Republic faces serious financial difficulty. Cologne-based Gerling Global Re, which last year collected €74.3 million in reinsurance premiums from Irish insurance companies, is reportedly exploring options regarding its future.
The company put itself up for sale last March and is considering spinning off its reinsurance arm. It is understood to be looking to raise €3-€3.5 billion from an initial public offering (IPO) before the end of the year.
The reinsurance unit of its business was hit hard last year following the September 11th attacks, losing more than €500 million. Deutsche Bank, which holds a 43.5 per cent stake in Gerling, has already provided millions of euros in emergency funding.
A company spokesman said yesterday it was still too early to say if there would be any implications for its Irish business. Mr Cristoph Groffy said another option for Gerling, apart from an IPO, would be to enter into strategic partnerships.
Mr Rolf Gerling, who controls 65 per cent of the company and is a grandson of the founder, has hired UBS Warburg to represent him and explore options for the company. While Mr Gerling is opposed to the break-up of the insurance giant, it is believed the reinsurance arm may be sold if an IPO is ruled out in these poor market conditions.
International rating agency Standard and Poor's this week lowered Gerling's credit and financial strength ratings amid concerns over poor earnings and the possibility of further losses at its US business.
Earlier this year Gerling announced a restructuring of its troubled reinsurance portfolio and the departure of former chief executive Mr Norbert Strohschen.
The Department of Enterprise, Trade and Employment, which regulates the insurance industry in the Republic, said reinsurance was not covered by its brief. A spokeswoman said insurance companies were responsible for safeguarding their own reinsurance policies.
According to the Irish Insurance Federation (IIF), reinsurers such as Gerling provide insurance cover to insurance companies, allowing them to limit their exposure to claims. In effect, reinsurance allows insurers to expand their capacity to take on risk.
IIF spokesman Mr Martin Long said, in the event of a reinsurance company running into serious financial difficulty and closing, its clients would lose their premiums and would be required to find a new reinsurer immediately.
