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.
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.
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, Keese said.
“Given that these banks are unlikely to default, the remaining credit risk exposure to banks is therefore £4.6 billion,” Keese said during Lloyd’s earnings call on Thursday (March 23). “This exposure is well spread across all markets and members.”
Lloyd’s exposure to US regional banks sits at around £630 million. Exposure to AT1 loans is at £33 million.
“We believe that the current issues do not put our positive investment outlook at risk,” said Keese. “However, we are in close contact with our market and regulators to understand our exposure and how we should respond.”
Meanwhile, 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,” Neal said.
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%.
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