Banks and insurers plan to rise from flames

While Greece’s politicians are fighting a rear-guard action to preserve the country’s future as a member of the Eurozone, the Athens banking and insurance elite are making plans to regenerate a troubled financial services industry.

In what is seen as a vastly over-populated, credibility-deficient industry of 70 players, backed by assets worth just €12bn, insurance companies are braced for a further cull in their already diminishing numbers.

“Two to three years from now, I am expecting fewer players in the Greek insurance market, healthier players with stronger balance sheets,” said Alexandros Sarrigeorgiou, CEO of EFG Eurolife and chairman of the country’s insurance trade body.

Last December saw a handover of regulatory responsibilities from the Supervisory Commission for Private Insurance to the Central Bank, following the revocation of licences for “bad practices” and failure to meet Solvency I standards. Insurer Aspis Pronia, Greece’s third largest, dismissed 700 staff in 2009 after its licence was revoked, affecting a million policyholders. This was the first of 10 Greek insurance companies to collapse during the last three years.

With the onset of tougher regulatory requirements, and Solvency II compliance by January 2013, some mergers and acquisitions are expected by industry insiders.

“I am optimistic, as in two to three years, the Greek economy will be exiting a period of crisis and entering a period of growth,” said Mr Sarrigeorgiou, on the eve of the Asset Management and Private Banking conference staged in Athens by Boussias Communications and FT Business.

Funds invested in the insurance industry will also support the economy indirectly by holding up the fragile stockmarket. However he conceded it is not the best time to approach the state for tax incentives to encourage long-term savings for pensions. Balance sheets could also be dented due to insurers’ substantial positions in Greek government bonds.

As a former asset manager with Allianz, Mr Sarrigeorgiou is keen for the fund houses to co-operate with banks and insurers, with government backing, to combat vast deficiencies in long-term savings and pensions. “The important thing is to get the government to put incentives on the table so that flows are created. Then we can find the balance as to who does what in the pensions story.”

While the finance industry is generally licking its wounds, there is a feeling things could have been worse. “We have not actually lost as many assets as we expected,” admits Dimosthenis Arhodidis, responsible for €8bn of clients’ funds as head of private banking at Eurobank EFG.

Like other Greek banks, the EFG group has offices in Luxembourg, Cyprus and Switzerland, so clients can hold money outside Greece and yet still remain under the Greek institution’s umbrella, which limits defections to international “safe haven” banks.

“We have also expanded our range of products and services, diversifying away from Greek risk,” he says, describing distribution agreements with external fund houses including Pictet, Pioneer, Morgan Stanley and Goldman Sachs Asset Management.

Piraeus Bank, a competitor of EFG, has revamped its advisory service as part of the service offered by its Piraeus Wealth Management joint venture with French bank BNP Paribas. The idea is to provide clients with more tactical and opportunistic investment opportunities and extend their time horizons to one or two years.

The strongest bets for these clients are in developed economies, according to George Kanaginis, CEO of Piraeus Wealth Management. “We believe emerging markets will continue to grow at high rates, but that their equity markets might be a bit inflated.”