August 8, 2002	Thursday	Jamadi-ul-Awwal 28,1423

FRANKFURT, Aug 7: Germany’s top life insurers Allianz and Munich Re have agreed to back an industry pool to bail out rivals facing solvency problems due to the stock market slump, company officials said on Wednesday.

The pool would act as lender of last resort should any of Germany’s 120 life insurers find themselves unable to pay guaranteed returns at the end of the year, an Allianz Leben spokesman told Reuters.

Ergo, the primary insurance arm of Munich Re, said it would take part in the rescue effort.

The global stock market rout has put the capitalization of some German life insurers, who have increased exposure to equities in recent years from a historically low base, under pressure.

Germany’s insurance industry has long resisted the idea of a pool, relying on regulation and takeovers to rescue the weakest players, but the market slump has reinforced fears that the sector’s reputation would suffer if just one firm were to fail.

Industry sources say a handful of German life insurers may be unable to meet their obligations at the end of 2002.

Familienfuersorge, a church-backed insurer based in North Rhine-Westphalia with half a million clients, was placed under the control of financial services regulator BAFin last month.

Final details of the pool plan have still to be worked out but a framework agreement should be announced next week, a spokeswoman for German insurance association GdV told Reuters. GdV is coordinating the talks.

German life insurers, like their peers in most continental European countries, offer a guaranteed return on premiums plus a variable bonus. In Germany the guaranteed return is 3.25 per cent.—Reuters