Corporate Advice to Insurers

Tightening belts

Insurers are faced with a twofold challenge: the European Central Bank has shifted its prime rate into negative numbers, but even before that the rate was not sufficient. As a consequence, the discrepancy between the revenue companies can make from investments and the interest they owe their clients (the policyholders) grows wider in the life insurance field. There is no end in sight to low interest rates, so the pressure will continue to rise.

Solvency II comes into force

As of January 2016, insurers are also affected by the Solvency II Directive. This set of regulations from the European Insurance and Occupational Pensions Authority (EIOPA) was announced long ago and therefore comes as no surprise. However, now comes a phase of extensive coordination with the authorities as to how exactly each provision should be implemented. Large insurers, such as HDI Global SE, have adapted their corporate structures accordingly, while the quantitative guidelines for capital endowment are forcing insurance companies to tighten their belts: from an economic perspective they are directed to take up profitable forms of investment such as infrastructure or credit funds, some of which are new to this industry. From a regulatory point of view, there are always new questions about the risks (which are higher precisely because of the higher yields) and how these are to be evaluated under Solvency II.

Moving beyond purely legal advice

A growing number of law firms are consolidating their work for insurers in internal groups that go beyond legal advice. This is because entrepreneurial questions, whether about corporate structure or the admissibility of high-yield investment forms, regularly lead to legal questions ranging from regulatory law to tax law and these require a more comprehensive answer. Firms with strong expertise in transactions and shares, such as Freshfields Bruckhaus Deringer, Linklaters and Clifford Chance, are already profiting from the fact that they have lengthened the value-creation chains of their insurance groups.

Allen & Overy is focusing on corporate pensions, an area also affected by years of low interest rates although, for the most part, not by Solvency II. The resulting demand for restructuring of companies, pensions, and reinsurers creates a promising market for legal advice, in which firms with years of intensive engagement with the insurance industry are in high demand.

Noteworthy developments took place at DLA Piper and BLD Bach Langheid Dallmayr. DLA substantially expanded its team by a total of five associates, which is consistent with its growing reputation in the market. BLD reinforced its partner ranks in Cologne by adding five veteran lawyers, staying true to its strategy of giving prospects to its younger lawyers. Departures were few this past year; Allen & Overy and Gleiss Lutz experienced some staff losses but were able to absorb the shock.

 


 

The firms discussed in this subchapter have built up experience in the insurance sector. They advise insurers on corporate restructuring, runoffs, M&A transactions, and crisis situations. The specific requirements of the insurance regulatory authorities play a role. The individual specialties of these firms are also discussed, with references to other chapters where applicable.