Italy insurance watchdog needs more details of Generali-Natixis deal, sources say

By Giuseppe Fonte and Valentina Za

ROME (Reuters) - Italy's insurance regulator IVASS needs more details about internal control and governance systems as it reviews domestic leader Generali's proposed asset management tie-up with French bank BPCE, two sources close to the matter told Reuters.

Generali, Europe's fourth-largest insurer, signed a non-binding accord with BPCE in January to combine their respective Generali Investments Holding (GIH) and Natixis Investment Managers units.

The tie-up would be Europe's largest fund manager by revenue and the second-biggest by assets under management.

Fragmentation is blamed for holding back Europe's fund industry, where players mostly lack global scale and are less competitive than U.S. rivals.

However, the deal has drawn criticism from some in Italy where the conservative government is keen to retain savings in domestic hands to help it with the task of refinancing one of the world's largest debt piles.

The government, which must approve the deal, has sought guarantees that Generali will remain in full control of allocating savings collected in Italy.

Insurance supervisor IVASS, meanwhile, needs more time to complete its review, said the sources, who asked not to be named due to the sensitivity of the matter.

They said the request for more clarity also includes details of the new entity's portfolio remuneration system.

IVASS and Generali both declined to comment.

Adding further uncertainty to the deal's chances of being finalised, Generali CEO Philippe Donnet, who has championed it, is running for reappointment this month amid a shareholder clash.

The final decision on the deal will be taken by the new Generali board, which shareholders will select on April 24. Three slates of candidates for the board have been filed, increasing the risk the vote produces a fractured board.

Under legislation designed to protect assets deemed of strategic national importance, Italy can set conditions for such deals.

Generali's second- and third-largest shareholders, respectively the investment vehicle of late Ray-Ban billionaire Leonardo Del Vecchio and real estate magnate Francesco Gaetano Caltagirone have been critical of the transaction.

Donnet has said the government review will provide an opportunity to dispel any concerns over the deal.

Generali and BPCE have said each will retain decision-making power over how their respective assets are allocated, while pooling management in a joint venture of which the units they are combining would each own 50%.

To further reassure Rome, Generali has said the structure of the deal separates asset ownership from asset management. And Donnet said last month Generali could buy more Italian debt.

Under pressure to step up Generali's dealmaking, Donnet has expanded the insurer's asset management operations, first by buying Conning Holdings, a U.S. asset manager specialising in insurers, then turning to BPCE, which had been looking for a partner for Natixis.

(Additional reporting by Gianluca Semeraro; Editing by Joe Bavier)