What is Lloyd’s of London exposure to Credit Suisse & Silicon Valley Bank?

Lloyd’s of London has confirmed that it has limited exposure to the banking crisis spurred by the collapse of Silicon Valley Bank and the takeover of Credit Suisse by rival UBS.

Some of the market moves were reminiscent of the early stages of the financial crisis once people clocked on to just how bad banks had messed up.

Credit Suisse tumbled more than 30 per cent at one point. Its peers BNP Paribas, Societe Generale and UniCredit all had their shares suspended. Deutsche Bank slid, as did Barclays, NatWest and Lloyds.

They insure companies against losses on new listings and when raising cash by selling off a segment of their firm. 

They also participate in capital markets, especially debt markets, where they are what economists call “market movers” meaning their actions exert a heavy influence over the direction of asset’s share price. It’s that participation in debt markets has come under scrutiny recently.

Chief financial officer Burkhard Keese
Chief financial officer Burkhard Keese

According to Chief financial officer Burkhard Keese, the fallout won’t put Lloyd’s positive investment outlook at risk.

Little impact is also expected from the underwriting side. “We believe that the current issues do not put our positive investment outlook at risk. However, we are in close contact with our market and regulators to understand our exposure and how we should respond.”

The insurance marketplace has an exposure of about £8.2 billion to the ongoing banking turmoil, of which, £3.5 billion relates to global systemically important banks.

Given that these banks are unlikely to default, the remaining credit risk exposure to banks is therefore £4.6 billion. This exposure is well spread across all markets and members.

Lloyd’s Chief financial officer Burkhard Keese

Lloyd’s exposure to US regional banks sits at around £630 million. Exposure to AT1 loans is at £33 million.

What is Lloyd’s of London exposure to Credit Suisse & Silicon Valley Bank?

Lloyd’s investment portfolio to Credit Suisse was not material to the market, according to CEO John Neal.

We have started quite early to de-risk all opposition. That’s true for the assets as well as the underwriting relationships we have with Credit Suisse

CEO John Neal

During the earnings call, Lloyd’s stressed its outstanding underwriting performance in 2022, despite the mark-to-market fall in the value of its bond holdings that led to a £800 million net loss.

Rising prices helped buoy the insurance marketplace to growth, according to Neal, who said that Lloyd’s is well-positioned to weather further uncertainty in 2023 due to its strong balance sheet.

Lloyd’s reported £46.7 billion in gross written premium for the full year of 2022, up from £39.2 billion in the year prior, as a combined ratio of 91.9%.

by Yana Keller