German cedants' claims add to Gerling Global Re's woes.

(From Insurance Day)

Byline: Herbert Fromme

GERLING Global Re (GGR) is under further pressure as cedants lodge claims against the reinsurer under a policy clause triggered by the fall in GGR's equity.

According to industry sources, certain German insurers are demanding that GGR, which is in run-off, hand over cash deposits equivalent to the claims reserves remaining with the reinsurer.

This latest development casts a shadow over the decision by the administrative court in Frankfurt, which approved the sale of GGR to manager Achim Kann in spite of the ban issued by financial services supervisory office Bundesanstalt f'r Finanzdienstleistungsaufsicht (BAFin).

GGR's customers base their claims on a clause in reinsurance contracts saying a cedant may cancel a reinsurance contract without notice and can demand the reserves, when a reinsurer has lost half its own equity. This is the case with GGR. The clause is included in numerous reinsurance contracts. GGR management board member Volker Weisbrodt said no demands have been received yet by the company that have a sound legal base. But he would not exclude the possibility of disputes with customers. Loss-making GGR has had its core property/casualty portfolio in run-off since October 2002. The company is currently transforming contracts through commutations.

Market sources say Cologne-based insurer DEVK, which is GGR's largest client, has received some E240m ($262m) of the total E400m claims reserves, which were accrued mainly ...