Italy close to securing industry safety net for Cinven-owned Eurovita, sources say

By Giuseppe Fonte and Valentina Za

ROME (Reuters) -Italian authorities are close to clinching a deal financed by insurers and banks including market leader Intesa Sanpaolo to rescue ailing life insurer Eurovita, people familiar with the matter told Reuters on Thursday.

Owned by Britain's Cinven, Eurovita is the first insurance company in Italy placed under special administration, insurance regulator IVASS said on Thursday, after its private equity owner refused to pump more money into it.

Cinven has agreed to a 100 million euro ($109 million) capital injection, but Eurovita needs a total of at least 400 million euros, sources have said.

Eurovita grew rapidly under Cinven but ran into trouble when rising interest rates prompted clients to redeem their policies to reinvest the money.

Under the rescue deal, rival insurers would inject the capital into Eurovita, while banks would provide lending, one of the people said.

The banks could also provide capital depending on the final form of the rescue, the source added.

The deal must be reached quickly to meet IVASS' demands that Eurovita, among the top 20 Italian life insurers, urgently acts to boost its solvency ratio, a key measure of financial strength for insurers.

Eurovita said in its 2021 financial report its solvency ratio had fallen below a "soft limit" tolerance threshold set at 150%, adding it was taking steps to bring it back above that level.

As talks continue under the direction of the Treasury and the regulator, IVASS said the government had approved a decree to put Eurovita under special administration for 12 months, while also extending until June 30 a halt to the early redemption of its products.

The regulator early this year put Eurovita under temporary administration after Cinven's efforts to sell it to a rival private equity firm collapsed over the lack of a re-insurer ready to take part in the deal.

Italian financial authorities, which appointed special commissioner Alessandro Santoliquido to run Eurovita, are keen to avoid its liquidation out of concern it may harm the perception of life insurance products as low-risk investments.

Authorities believe Eurovita is an isolated case, one of the sources said, as other Italian insurers and banks have a more balanced distribution of assets and are less exposed to redemptions.

($1 = 0.9187 euros)

(Additional reporting by Giulio PiovaccariEditing by Tomasz Janowski, Kirsten Donovan)