Lebanese Banks Present Subscribers with Limited Options for Savings Policies, All Involving Significant Losses

Lebanese financial institutions are presenting policyholders with three pathways forward on their savings programs, each carrying substantial drawbacks. Subscribers can terminate their policies and receive between 40 and 50% of their account value in cash, maintain frozen accounts for future recovery in dollars, or shift their holdings into fresh dollar-denominated accounts subject to particular conditions and constraints. The net result leaves policyholders facing losses regardless of which course they select.

These settlement proposals represent a continuation of strategies banks and affiliated insurance companies have pursued repeatedly since 2019. Early in the economic downturn, policyholders encountered offers to recover funds at exchange rates of 3,900 liras per dollar, later adjusted to 8,000 liras, coupled with monthly payment schedules or bank checks valued at only 15 to 20% of original amounts. The underlying aim has remained consistent: persuading account holders to accept arrangements that minimize costs to financial institutions.

How Banks Marketed These Products

Economic researcher Dr. Muhammad Fahili explains that commercial banks promoted these savings policies using the same marketing channels employed for credit cards and electronic payment systems. This approach led many citizens to perceive them as reliable banking instruments backed by institutional credibility. Fahili notes that substantial numbers of participants enrolled directly following bank recommendations, viewing these programs as secure savings mechanisms, particularly those structured around retirement planning, educational funding, or insurance protection.

The financial crisis fundamentally altered this landscape. What were once marketed as secure products became contested territory between financial institutions and rights holders. Fahili identifies a critical complication: the Bank of Lebanon does not directly regulate insurance companies, which fall under Ministry of Economy supervision. This jurisdictional divide meant central bank circulars excluded these funds, leaving no transparent settlement framework to safeguard subscriber interests.

International Pressure Driving Current Initiatives

According to Fahili, the current push by banks and insurance companies to contact subscribers stems largely from pressure exerted by international reinsurance firms. These external partners demand settlement of outstanding claims connected to bank assurance policies and similar products before contract renewals proceed. Unpaid policies that have reached maturity become liabilities threatening relationships with international reinsurance partners, creating urgency to resolve as many accounts as possible. Fahili identifies this external pressure as the primary motivator behind present settlement efforts.

Regarding settlement percentages currently offered to policyholders, which have climbed from 30% to as high as 50% in certain cases, Fahili suggests that mounting pressure on insurance companies could eventually yield improved terms. Subscribers with financial flexibility may find waiting advantageous, though the decision ultimately depends on individual circumstances and immediate liquidity requirements.

Fahili advocates treating these policies, especially savings-oriented products, as analogous to traditional bank deposits, enabling owners to access protections under Circulars 158 and 166. He observes that many insurance companies selling policies with savings or capitalization features maintain direct or indirect ties to Lebanese banks, deepening the interconnection between banking and insurance sector difficulties and tying policy outcomes to resolution of Lebanon's deposit crisis.

Legal Protections and Consumer Advocacy

The Lebanese Society for the Protection of the Insured maintains that insurance companies offering products containing financial instruments, savings components, or investment elements must repay full amounts in the contract's original currency—actual US dollars—at values reflecting genuine recovery rates. The organization emphasizes that legal distinctions between funds held domestically and those positioned internationally lack validity. It cautions against initiatives compelling citizens to redeem savings policy values through bank checks or alternative arrangements.

Presently, policyholders navigate an uncomfortable choice between accepting immediate, definable losses or gambling on speculative future improvements. Banks conduct negotiations individually, each institution offering distinct terms without coordinated strategy or comprehensive programming, perpetuating fragmentation and subjecting customers to inconsistent treatment outcomes. Until systemic solutions emerge, full rights restoration remains indefinitely deferred.