Lengiewicz Wrońska Berezowska i Wspólnicy (LBW) has submitted a complaint to the Komisja Nadzoru Finansowego (KNF), the Polish regulator requesting control of the activity and assets of TU Europa and TU Open Life and the appointment of a temporary board replacing the one that caused the damage to the policy holders, according to Anna Lengiewicz, managing partner at LBW. The law firm is acting on behalf of the Municipal Commission for Consumer Protection (MCCP) in Warsaw and filed 357 applications on behalf of these clients requesting an inspection of the two companies.
The request was submitted on behalf of investor in unit-linked life insurance products launched by TU na Życie Europa and TU Open Life Życie, with the application listed on a dedicated website. The KNF has yet to reply.
“The basis for claims is that consumers were buying life insurance products, which in fact were structured products based on indexes with unknown structures and composition; the contracts were unclear and misleading; and consumers were not informed about the risk connected to those products,” said Lengiewicz
The products were linked to the following indices - from Nomura: Growth Poland Index, Growth Poland Index 2, Growth Poland Index 3, GoBrazil, GoChina, GoPoland; from Royal Bank of Scotland: VC Aquantum Pegasus Zeus Index, VC Commodity Autopilot Index ER 10%, Volatility Controlled Emerging Opportunities Strategy 2; and, from BNP Paribas: Libra Emerging Markets, New Frontier 8, Millenium Commodities IsoVol6, Africa RC 10, Agriculture RC 11, Bric RC 10, Energy RC 11, Industrial Metals RC 11, Poland RC 20, and Precious Metals RC 11.
These investors are also part of a class action filed by 895 suing for the return of money lost on structured products. The lawsuit was initiated at the end of last year. “We have asked the court to pass a sentence stating that the contracts with these consumers are invalid and order the repayment of all client money,” said Lengiewicz.
Those buying unit-linked policies issued by TU Open Life between 2011 and June 2014 invested PLN2.405bn (€580m), while the current value of these assets is PLN1.408bn: the products are derivative-based policies Plan Regularnego Oszczędzania Zabezpiecz Przyszłość, Plan Oszczędnościowy Stabilne Oszczędzanie, Symfonia Zysków, Dziesięciokrotka, Genesis, Plan Regularnego Oszczędzania Gemini, Kwartalny Profit, Światowe Bogactwa, Światowe Rynki, Kwartalny Profit Plus, and non-derivative based funds Better Future, Plan Inwestycyjny Skuteczne Oszczędzanie, Plan Inwestycyjny Lepsze Jutro, according to LBW.
The credit risk of the products is linked to Getin Noble Bank, while the derivative counterparties hedging for the TU Open Life products were Nomura and RBS. The products launched by TU Europa are linked to strategy indices launched by BNP Paribas, Nomura and RBS and hedged by the same parties.
In most cases, the distributor was Getin Noble Bank (now part of LC Corp) or entities within its group. Getin Holdings was the main shareholder of the insurance companies and Getin Noble Bank when the structured products were launched. TU Europa belonged to Getin Holding until 2011, when it was acquired by Germany’s Talanx and Japan’s Meiji Yasuda. TU Open Life is part of the Open Finance Group. Getin Holding, Getin Noble Bank, LC Corp and Open Finance are now listed on the Warsaw Stock Exchange.
The value of funds launched by TU Europa fell by 38% between 2009 and June 2014: investors had originally placed PLN1.949bn in TU Europa’s products, although the current value is PLN1.199bn.
All the TU Europa products are derivatives-based, fund-linked policies: Libra I, Libra II, Libra III, Pareto, Pareto II, Plan Oszczędnościowy Bezpieczna Przyszłość, Plan Oszczędnościowy Bezpieczne Oszczędzanie, Stabilny Plan Oszczędnościowy, Pareto Millennium, Pareto Millennium II, Kwartalne Zyski, Nature Premium, Enterprise.
The investors paid TU Europe PLN1,643,476,983.64, which was worth PLN1,046,872,260.59 on June 30, 2014, while TU Open Life’s investors paid PLN2,405,727,542.06, which was worth PLN1,424,297,190.08 on June 30, according to Lengiewicz. “That means that by June 30, TU Europa and TU Open Life had lost PLN 1,578,035,075.03 of their clients’ money,” according to Lengiewicz. The valuations were based on financial reports produced by the insurance companies.
The lowest current value was registered for the Libra Emerging Markets II 1 products (coded 2011_ULIB3_01_v01), which were linked to the structured unit-linked fund Europa Fund LIBIII/2011/01, whose initial unit value was PLN200, but fell by June 2014 by more than 57% to PLN87.32, according to a memo written by the law firm.
Getin Noble Bank (now part of LC Corp) stopped offering long-term (10 years) structured life insurance policies that require investment in instalments but continues to offer short-term (4 years) structured products which required a lump sump investment
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