Decree-Law 91/2014 added the following provision to Article 114(2) of the Consolidated Law on Banking (Decree-Law 385/1993):
"Italian insurance companies and SACE [the Italian export credit agency] shall not carry out any kind of financing activity with the public, other than the granting of guarantees and only to subjects that are not physical persons or microenterprises, as defined in art. 2, paragraph 1 of the Annex to Recommendation 2003/361/EC of the European Commission of 6 May 2003, within the limits set by Legislative Decree no. 209 of 7 September 2005 as amended by this Law, and related implementation provisions issued by IVASS."
On October 21 2014 IVASS (the Italian insurance regulator) approved amendments to Regulation 36/2011 which govern investments to cover technical reserves, providing that insurers can offer loans to enterprises within certain limits and under certain principal terms.
The amount of each loan must not exceed:
- 20% of the borrower's net equity (based on its latest financial statements); or
- 1% of the insurer's technical reserves.
Categories of loan
Four categories of loan are envisaged:
- direct loans selected by a bank or financial intermediary which meet the following criteria regarding the quality of the borrower and the relationship with the intermediary (admissible within the maximum limit of 5% of technical reserves to be covered):
- the bank withholds at least 50% of the loan and is entitled to the same rights as those enjoyed by the insurer with regard to interest and repayment of principal;
- the borrower has a high degree of creditworthiness; and
- the borrower's financial statements have been audited;
- direct loans selected by a bank or financial intermediary which do not meet all of the above criteria (admissible within the maximum limit of 2.5% of technical reserves to be covered) – that is, where the bank withholds at least 50% of the loan and is entitled to the same rights as those enjoyed by the insurer with regard to interest and repayment of principal, but where the borrower does not have a high degree of creditworthiness and/or its financial statements have not been audited;
- direct loans selected by a bank or financial intermediary which meet none of the above criteria (allowed within the maximum limit of 1% of technical reserves to be covered); and
- direct loans not selected by a bank or financial intermediary, but which are specifically authorised by IVASS. IVASS may authorise the autonomous identification of potential recipients of direct loans following evaluation of the activity plan, taking into account (among other things):
- solvency capital requirements exceeding minimum capital requirements; and
- measurements of capital absorption for direct loans that will be subject to evaluation under the EU Solvency II Directive (2009/138/EC).
David Maria Marino, Francesco Cerasi & Mauro Carretta
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.