Luxembourg-Based Insurer FWU Life Insurance Lux Declares Insolvency. 300.000 clients are risking their savings

Luxembourg-based insurer FWU Life Insurance Lux has declared insolvency, according to a press release from provisional bankruptcy trustee Ivo-Meinert Willrodt and from German newspaper Merkur.de.

This bankruptcy, which impacts several countries, including Germany, follows the bankruptcy proceedings of its parent company, Finanz-Holdinggesellschaft FWU AG. The company, based in Grünwald near Munich, had already filed for bankruptcy on July 19. This new development affects 300,000 customers, many of whom are in Germany.

“The current situation presents a major challenge,” CEO Manfred Dirrheimer stated. “In light of the changed economic conditions, our significant investments, and the resulting consequences for FWU AG, the insolvency filing could not be avoided.” The notice also mentioned that FWU Life Lux had ceased new business operations in early July and is currently only maintaining its existing business.

According to the Süddeutsche Zeitung, the insolvency of the well-known insurer is attributed to counter-insurance and guarantees provided to other parties. When these parties faced distress, they called in the insurance company’s guarantees, leading to financial trouble.

As a result of the insolvency, the Luxembourg insurance supervisory authority has imposed a payment ban, preventing customers from withdrawing their money. This is a significant blow to many customers, particularly those with life insurance policies.

The Scale of the Bankruptcy

FWU AG employs approximately 420 people and operates ten locations worldwide. In Europe, the group serves about 285,000 customers with assets totaling nine billion euros. Unit-linked life insurance policies constitute the majority of the life insurer’s business. However, consumer advocates often advise against these policies due to their high costs.

The future for the workforce appears bleak, as FWU must address the financial shortfall within three months. If this does not happen, the regulator plans to revoke the insurer’s license. One potential solution to avoid outright bankruptcy is to sell its Austrian subsidiary, FWU Life Austria, which is considered financially stable. However, such a sale requires time, which the company may not have.

FWU Lux’s Bankruptcy: Not the Last This Year

Bankruptcy trustee Willrodt stated that FWU AG’s business operations will continue. “We will explore all restructuring options,” Willrodt said. “The process is complex, but we are committed to finding a long-term solution for the company.” However, this recent insolvency is part of a broader trend that has accelerated since the beginning of the year, particularly in Germany.

According to a recent analysis by business consulting firm Falkensteg, the number of large bankruptcies increased by 41 percent in the first half of 2024 compared to the same period last year. “Saving companies from insolvency is becoming increasingly complex. High interest rates make acquiring insolvent companies more expensive or unattractive. Additionally, sales uncertainty due to the general economic situation discourages potential investors,” said Jonas Eckhardt, a partner at Falkensteg.

Eckhardt predicts that this trend will continue in the long term, with more failures expected, including that of a traditional company founded 208 years ago. “Many companies must adapt to survive in the dynamic international trade market,” he added.