The insurance industry has faced major challenges through the financial crisis, with declining asset values and increased credit risk putting pressure on capital buffers. Regulatory change is also a key issue in many parts of the world.
For the life insurance industry low interest rates and high capital requirements are impacting on profitability and starting to drive business decisions. For insurers in Europe, the implementation measures for Solvency II remain uncertain and the eurozone crisis adds further issues.
With asset values low and regulatory uncertainty high globally, we expect to see opportunities for M&A, whether as a result of insurance companies divesting their non-core assets or others, such as banks, selling their insurance arms. Raising or optimising regulatory capital remains a key issue and we expect to see liquidity (starting with the banks) potentially driving M&A. This current environment provides an excellent opportunity for insurers both to plug the gaps left by banks with alternative investments – for example in infrastructure, and also to provide liquidity to banks via liquidity swaps.
Throughout these developments our insurance team has advised insurance companies, investment banks and other financial institutions on various actions to manage assets and liabilities and mitigate larger risks. We have been active in advising on M&A, distribution arrangements, bulk purchase annuity work and longevity transactions. Our longevity work was recently recognised by our winning the Most Innovative Firm in Corporate Law award at the Financial Times Innovative Lawyers Awards 2012 for our longevity deals for pensions funds and pension solution providers.
Our clients gain the benefit of expert advice from global specialists in corporate insurance, M&A, litigation, restructuring and insolvency, capital markets, tax, employment and regulatory matters.
We continue to lead the market through innovation in relation to structures which achieve the right effect both under current regulations and (the current shape of) Solvency II. We have advised on capital raising, including contingent loan transactions, rights issues and on hybrid capital and senior bond issues.
To discuss legal issues with Linklaters’ global insurance team, please contact Victoria Sander, Wolfgang Krauel, Matthew Middleditch, Scott Sonnenblick or Duncan Barber.
Recent insurance transactions include advising:
- the Charoen Pokphand Group on the acquisition of a 15.57% shareholding in Ping An Insurance (Group) Company of China, Ltd
- Lloyds Banking Group on the sale of its German life insurance subsidiary, Heidelberger Lebensversicherung
- the underwriters on the IPO of Direct Line Insurance Group
- Ageas on the sale of former Fortis' bad bank assets for a total deal value of €6.7bn
- AXA on the acquisition of HSBC's general insurance business in Hong Kong, Singapore and Mexico, and on bancassurance agreements in Hong Kong, Singapore, India, Indonesia, China and Mexico
- HSBC on its US$2.1bn disposal of HSBC's banking and insurance operations in Panama to Bancolombia
- Groupama SA on the sale of Groupama Insurance Company Limited to Ageas (UK) Limited
- Insurance Australia Group on the sale of their UK subsidiaries, including Equity Red Star
- New York Life Insurance Company on the sale of its insurance businesses in China, Hong Kong, South Korea and Thailand
- on the US$20bn offering and listing of AIA Group
- Deutsche Bank on a €12bn longevity swap transaction with AEGON Derivatives N.V., the largest longevity risk transfer swap transaction to date
- Allianz on the issue of €500m convertible Notes with scheduled maturity in 2041 and with contingent mandatory conversion (the first "coco" issued by a European insurer)
- the trustees to the Rolls-Royce Pension Fund on a £3bn longevity swap entered into with Deutsche Bank.