According to Fitch Ratings, last month’s interim judgement delivered by the Dutch Court of Appeal in respect of certain unit-linked insurance policies, will not impact the ratings of either Nationale-Nederlanden Levensverzekering Maatschappij N.V., which sold the policies in the 1990s and early 2000s, or the wider NN Group N.V. (NN).
Fitch stated that Nationale-Nederlanden has an Insurer Financial Strength rating of ‘AA-’/Stable, while NN has an Issuer Default Rating of ‘A+’/Stable.
During its interim judgment that took place on September 26, The Court of Appeal said that there was no contractual basis for certain costs and cost deductions as NN should have provided more information to policyholders on this.
In addition, the collective proceedings initiated by Woekerpolis.nl – a consumers’ association – against NN and the interim judgment concern NN’s Flexibel Verzekerd Beleggen (FVB) unit-linked policies on a universal life basis.
Fitch noted that at end-September 2023, around 66,000 FVB policies were still active.
According to the ratings agency, NN’s capitalization has “sufficient headroom” within the ‘AA’ category to withstand potential adverse developments of this legal dispute. Fitch also noted that it expects capitalization to remain very strong.
At the end of H123, the group’s Solvency II ratio was 201% and the reported financial leverage ratio reached 18%.
Going forward, Fitch expects both ratios to remain “significantly stronger” than the agency’s thresholds for a possible negative rating action.
It is important to note however, that it will likely take several years for any potential settlement to become effective, giving management time to create additional capital resources if needed. This may also include longevity reinsurance transactions.
Lastly, both the overall size and timing of any financial impact from the dispute on NN remains uncertain.
The company will appeal to the Dutch Supreme Court and it is very likely that it will take more than one year to have a final judgement. Any settlement will then involve negotiations between Woekerpolis and NN, and customers will then have to apply for compensation.
