Yarden’s future at risk due to DELA’s withdrawal


Nineteen customers have handed Yarden such a legal blow that the funeral insurance company seems to go under more than two weeks later. On Tuesday, market leader DELA announced that it would abandon the acquisition of Yarden, announced at the end of last year. This takeover would mean the rescue of Yarden, which had run into financial problems, the country’s second largest funeral insurance company.

However, DELA no longer sees the takeover because of the ‘uncertainty’ created by the ruling in the interim injunction brought by Yarden customers about the reduction of their insurance conditions.

Decades ago, the nineteen customers – the oldest is 88 years old – took out a so-called ‘funeral in kind policy’ with the Algemeene Vereeniging for Corpse Burning, a legal predecessor of Yarden. The policy gave the right to an organized funeral. In 2007, Yarden wanted to convert its approximately 390,000 in-kind policies into a policy that pays out a fixed amount upon death. It would therefore have to maintain considerably fewer facilities. For a small group of policyholders, Yarden maintained the funeral in kind policy upon request.

Yarden, which accounts for 1.4 million funeral policies in total, discovered in August 2018 that the conversion had not been legally valid in 2007. Yarden had to retroactively classify the 390,000 policies as funeral in kind policies and hold an additional EUR 260 million in technical provisions. As a result, solvency – which indicates the extent to which the insurer can meet its obligations in the future – fell.

Alarm bells

As a result, all alarm bells went off at the regulator De Nederlandsche Bank (DNB). After Yarden informed the regulator that it could no longer meet the statutory capital requirements, DNB requested a recovery plan. In it, Yarden had to indicate how it would again meet the legal capital requirements. Part of the emergency plan devised by Yarden was to unilaterally convert all funeral in kind policies to a policy that pays out 3,201 euros in the event of death. Customers received a letter stating that if that amount was not sufficient for their funeral, “after your death […] the difference has to be paid ”.

The measure was studied extensively in advance by the regulator DNB, according to a court decision. Lawyers from DNB, external advisers and the DNB management qualified it as ‘sustainable under civil law’. At the same time, they noted that there are “no guarantees” for this.

The latter became apparent on 11 September in the summary proceedings that the nineteen Yarden customers sued to maintain their funeral in kind policy.

A subdistrict court in Almere ruled that the massive conversion of the policies “despite the precarious financial position of Yarden” may be contrary to reasonableness and fairness. And so he obliged Yarden to enforce the original in-kind agreement. All this in anticipation of a regular, long-winded substantive procedure in court.

Also read: Why Yarden customers are short on their funeral

The patience for this is not present at DELA (in full Wear Elkanders Lasten). “It may take years before legality is legally tested. DELA has decided not to wait for this uncertain development, ”the funeral cooperative states in a press release. DELA director Edzo Doeve says it is “extremely regrettable” that the takeover is canceled because it would have been good for employees and policyholders of DELA and Yarden “and the whole of society”. “But as a non-profit cooperative, we serve the interests of our members [verzekerden] to put first. And that is exactly what we are doing now, because the uncertainty at Yarden is not in the interest of our members. ”

DELA announced the “takeover in solidarity” October last year. It then turned out that, despite the unilateral conversion of the funeral services in kind in the long term, Yarden would still have insufficient financial buffers.

Now that the takeover is canceled and the judge has put a (temporary) line due to the change in the funeral expenses and benefits in kind policies, the survival of Yarden seems seriously at stake. After regulator DNB had previously enforced a recovery plan from Yarden and also appointed a ‘silent bankruptcy trustee’ last year to keep an eye on things, the top of DNB’s escalation ladder is coming painfully close.

Two options for DNB

Roughly, the Recovery and Settlement of Insurers Act gives DNB two options for insurers in need. Either bankruptcy is filed, or DNB itself takes over the direction to ensure ‘settlement’ of the insurer. In that case, the regulator itself will look for a buyer or the regulator will implement a – legally unstoppable – austerity measures for all insurance policies.

The explanatory memorandum to the law shows that DNB may only take control of major social consequences or significant adverse consequences for the financial markets or the economy. A threshold is also given when this is the case: for more than 1 million policyholders. Yarden has 1.4 million. Ironically, two things that currently seem far away cannot be ruled out: that the in-kind policies will still be converted and that DELA will still become the owner of Yarden.

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