Bail-out for German insurer Mannheimer

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The Independent Online

A group of German insurers were preparing yesterday to bail out their troubled rival, Mannheimer, which is struggling after falling stock markets depleted its reserves.

Analysts are warning that the move could lead to a flood of similar calls for help, as a number of German insurers have suffered heavy investment losses and are in need of capital.

"The market is very anxious to avoid the closure of a major institution, but this is not the only German insurer that could be in trouble and we could see action of this type again," Charles Graham, an analyst at Williams de Broe, said.

Munich Re, Allianz and other insurers have been discussing how to rescue Mannheimer and are set to pledge €370m (£260m) in support. Allianz may foot up to 20 per cent of the bill.

A spokeswoman for the GDV, the German association of insurers that has been co-ordinating the talks, said clearance for the deal would have to come from the regulator, BaFin. A meeting is scheduled for next week.

The German insurers recently established an industry-funded compensation scheme, similar to the UK's Financial Services Compensation Scheme. The Protector fund is responsible for most of Mannheimer's losses, but the group is still in need of more capital. The insurers may decide to transfer the whole business in to the hands of Protector.