3 options…the best is bitter
Banks offer subscribers either to cancel the policy and close the accounts permanently, in exchange for receiving only between 40 and 50% of its value in cash, or to freeze it and recover it later in “dollars,” or to transfer it to accounts in fresh dollars, within specific conditions and restrictions. Thus, subscribers find themselves faced with three options, all of which involve direct or indirect losses.
The attempts of banks and insurance companies behind them are not new, as they have been repeated more than once since 2019, in the context of pushing subscribers to accept settlements similar to those imposed on deposits. In the early years of the crisis, policyholders were offered to recover their money at an exchange rate of 3,900 liras to the dollar, then on the basis of 8,000 liras, with a monthly installment mechanism within specific ceilings, or via bank checks whose actual value did not exceed between 15 and 20% of their money, in an attempt to close accounts and end these programs, at the lowest possible cost to banks and insurance companies.
This is how banks sold savings policies
Economic researcher Dr. Muhammad Fahili explains that these policies were offered by commercial banks to customers in the same way that credit cards and electronic payment cards were marketed, which made citizens deal with them as a guaranteed banking product, based on trust in the banking system and in the banks themselves. In contact with “Lebanon 24,” Fahili indicated that a large segment of participants entered these programs with direct payment and encouragement from banks, and considered them a safe means of saving, especially those related to retirement, education, or insurance benefits.
But the financial crisis completely changed the scene, turning these policies into a subject of dispute between insurance companies and banks on the one hand and rights holders on the other. Fahili points out an additional complication, which is that the Bank of Lebanon does not directly supervise insurance companies, as the regulatory authority for these companies goes back to the Ministry of Economy, so the Central Bank’s circulars did not include these funds, which created difficulty in identifying clear settlement mechanisms that protect the rights of subscribers.
Moving the file under pressure from international insurance companies
The rush of banks and insurance companies today towards communicating with subscribers is due, according to Fahili, to the pressure exerted by external reinsurance companies, which demand the liquidation of outstanding files, and the payment of dues or “Claims” resulting from “Bank Assurance” policies and the like, before renewing reinsurance contracts. He adds that any policy that has matured and has not been paid practically becomes a burden that threatens the relationship of Lebanese insurance companies with international reinsurance companies, which prompts them to try to close as many files as possible. Fahili believes that this factor in particular is the main driver of the current settlement attempts, to ease external pressures and restore their normal relationship with reinsurance companies.
The offer rises to 50%…waiting may be profitable
Regarding the offers currently offered to policyholders, which in some cases have risen from 30 to 40%, Fahili believes that the increasing pressure on insurance companies may later push them to improve the terms of settlements, which means that the subscriber who is able to wait may benefit from better conditions in the future, although the final decision remains linked to each person’s ability to endure and his need for liquidity.
Fahili believes that the most appropriate solution is to deal with these policies, especially savings ones, as more like traditional bank deposits, allowing their owners to benefit from the benefits related to Circulars 158 and 166. He points out that a large percentage of insurance companies that sell policies that include savings or capitalization elements are directly or indirectly linked to Lebanese banks, which increases the intertwining of the crisis between the banking and insurance sectors, and makes the fate of these policies closely linked to the path of addressing the deposit crisis in Lebanon.
Lollar settlements are illegal
The Lebanese Society for the Protection of the Insured believes that insurance companies in insurance products that include financial instruments or contain savings or investment aspects must return and pay all amounts according to the actual contract currency, that is, in the actual US dollar, and in an amount equivalent to the actual recovery value, in the event that it is decided to liquidate the policy. It is also not legally valid to distinguish between amounts saved or invested inside Lebanon and those located abroad. He warns of the danger of any efforts or scenarios aimed at forcing citizens to redeem the value of their savings policies via bank checks or dollars.
In the end, policyholders find themselves facing a difficult trade-off between a certain immediate loss or waiting for uncertain results. At a time when banks deal with subscribers individually, each bank offers different offers and settlements, without any unified approach or comprehensive solution for savings programs, which perpetuates a state of dispersion and places customers facing disparities in treatment and results. As this reality continues, the restoration of full rights remains postponed indefinitely.
