The chief executive
of the multi-billion pound Lloyd's of London has
publicly admitted that the world's leading insurance
market is prepared for a collapse in the single currency
and has reduced its exposure "as much as possible"
to the crisis-ridden
continent.
Richard Ward said Lloyd's of London could have to take
writedowns on its £58.9bn
investment portfolio if the Eurozone collapses.
Richard Ward said the London market had put in
place a contingency plan to switch euro underwriting to multi-currency
settlement if Greece abandoned the euro.
In an interview with The Sunday Telegraph he also revealed that Lloyd's
could have to take writedowns on its £58.9bn investment portfolio if the
Eurozone collapses.
Europe accounts for 18pc 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.
Lloyd's move comes as a major Franco-German provider of credit insurance for
Eurozone trade, Euler Hermes, said it was considering reducing cover for
trade with Greece because of the risk the country might leave the Eurozone.
When a company goes bust, it is often sparked by withdrawal of credit
insurance for suppliers wanting to trade with it.
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."
Lloyd's fears are likely to be shared by a
number of European businesses, which are watching developments in Greece.
On Saturday, Juergen Fitschen, co-chief executive of Deutsche Bank,
described Greece as a "failed state" run by corrupt politicians.
"I'm quite worried about Europe," Mr Ward
said in one of the first admissions by a major UK business leader of the
scale of the crisis that would be prompted by a Eurozone collapse.
"With all the concerns around the Eurozone at the moment, we've got to
be careful doing business in Europe and there are a lot of question
marks over writing business in the future in euros.
"I don't think that if Greece exited the euro it would lead to the
collapse of the Eurozone, but what we need to do is prepare for that
eventuality."
Mr Ward says Lloyd's had been working hard on
contingency planning and had the capability to switch settlement of European
underwriting from Euros to other currencies.
"We've got multi-currency functionality and
we would switch to multi-currency settlement if the Greeks abandoned the
euro and started using the drachma again," he said.
Lloyd's has de-risked its asset portfolio in
recent years, with investments split equally into cash, corporate bonds and
government bonds, mostly in the US, UK, Canada and Australia.
"We have de-risked the asset portfolio as
much as possible," he said.
The contingency planning comes as German
politicians piled the pressure on Greece ahead of elections on June 17.
A conservative member of German chancellor Angela Merkel's cabinet said
today Germany would not,
"pour money into a bottomless pit".
On Sunday, Swiss central bank chief Thomas
Jordan admitted his country is drawing up an action plan in the event of the
Euro's collapse.
