LLOYD’S of London has made preparations for the collapse of the euro. Richard Ward, its chief executive, has publicly admitted that the world’s leading insurance market has reduced its exposure ‘as much as possible’ to the crisis-ridden eurozone.
Lloyd’s of London could have to take writedowns on its £58.9bn investment portfolio if the eurozone collapses, he warned in a Sunday Telegraph interview yesterday. He said the London market has put in place a contingency plan to switch euro underwriting to multi-currency settlement if Greece abandons the euro.
Europe accounts for 18 per cent of Lloyd’s £23.5bn of gross written premiums, mostly in France, Germany, Spain and Italy. The market also has a fledgling operation in Poland.
The Lloyd’s of London move comes as a major Franco-German provider of credit insurance for eurozone trade, Euler Hermes, said it was considering reducing insurance cover for trade with Greece.
A spokesman for Euler Hermes, Bettina Sattler, told Bloomberg: ‘The outcome of the new elections in June remains highly uncertain. Consequently, the situation is further deteriorating. The risk of Greece exiting the eurozone has been revived. In light of the recent developments, Euler Hermes will most probably have to switch to a more prudent approach. We have maintained a high level of cover for our customers until today. But now we are confronted with a changing situation.’
On Saturday, Juergen Fitschen, co-chief executive of Deutsche Bank, described Greece as a ‘failed state’ run by ‘corrupt politicians’.
In a bid to assure clients, Ward of Lloyds added: ‘We’ve got multi-currency functionality and we would switch to multi-currency settlement if the Greeks abandon the euro and start using the drachma again.’
His warning comes as German politicians piled the pressure on Greece ahead of elections on June 17. A conservative member of Chancellor Merkel’s cabinet said on Saturday that Germany would not ‘pour money into a bottomless pit’.
• Spain’s fourth-largest bank, Bankia, has asked the Rajoy government for a 19bn euros (£15bn) bailout. Two weeks ago, Bankia had a 4.47bn-euro loan from the Spanish bailout fund converted into a 45 per cent stake in the bank. Bankia’s parent Banco Financiero y de Ahorro (BFA) made the latest bailout request after a meeting of the Bankia board on Friday.
Following the bailout, Bankia will issue 12bn euros in capital that will be underwritten by BFA. Bankia also issued revised results, saying the bank made a 2.98bn-euro loss for 2011 rather than the 309m euros profit it announced in February.
Earlier on Friday, trading in Bankia shares was suspended on the Madrid stock exchange while its management put together a restructuring plan. Bankia was created in 2010 from the merger of seven struggling regional savings banks. It holds 32bn euros in distressed property assets.