Pension fund in liquidation does not have to pay any interest to subordinated creditors

The Deutsche Steuerberater-Versicherung does not have to pay the current interest on the subordinated bonds during the time of their liquidation. This was confirmed by the Frankfurt Higher Regional Court. The court dismissed an appeal from the relevant subordinated creditors. This confirmed a corresponding judgment of the Frankfurt Regional Court of May 2021.

As announced by the pension fund, it had issued new subordinated bonds for a total nominal value of 10 million euros and a term of 10 years in 2014 after consulting with the supervisory authority. Due to the business situation of the insurer and the liquidation that began later in January 2022, it had not paid the interest on the bonds due in September 2019, September 2020 and September 2021, which amount to around 1.3 millions of euros. Rightly so, as the Frankfurt Higher Regional Court has now confirmed.

The courts followed the Deutsche Steuerberater-Versicherung view that the reorganization process triggers “only subordinate liability for bond claims”. Therefore, the pension fund does not have to pay the interest claims, and the subordinated liability also extends to the claim for the capital of the bonds, which matures in 2024.

In practice, this means that subordinated capital and accrued interest totaling around EUR 12.6 million at the end of 2024 will in any case only have to be paid once the pension fund has been fully liquidated. However, since the pension fund still has to honor existing insurance relationships until the death of the last insured person and possibly also surviving dependents, this can take a long time. The subordinated capital and accrued interest are therefore practically useless to the subordinated creditors until then, while the Deutsche Steuerberater-Versicherung can invest the corresponding amounts for the insured until they are processed to generate income.

The sentence could have a signal effect for other insurance companies and pension funds

After the verdict, the specialized magazine Versicherungsmonitor (pay barrier) highlighted its importance: pension funds or insurance companies in a similar situation could see the verdict as “good news”. The insurance industry portal today (payment barrier) also called the decision an “important legal victory” for the pension fund.

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