Shareholders at FBD have voted in favour of a €70 million loan that will help the troubled insurer meet tough new solvency standards that the European Union intends to impose on underwriters from January 1st.
Canadian multinational Fairfax Financial Holdings is lending the money to FBD through a 10-year bond that the lender has the right to convert into a 19 per cent stake in the Irish company. The bond has an interest rate of 7 per cent a year and Fairfax will have the right to convert the bond to FBD shares at €8.50 each.
A majority of FBD shareholders approved two resolutions linked to the loan at an extraordinary general meeting in Dublin on Wednesday.
Fairfax’s loan will help ensure FBD exceeds new standards from the EU designed to ensure insurance companies have enough capital to meet claims. The directive, known as Solvency II, is due to come into force on Friday.
FBD, which reported a first half loss of €96.4 million in August, its worst result in 40 years, recently warned that profitability will continue to be “challenging” as the insurance industry continues to be loss making for 2015 and 2016.