European insurers clear of Credit Suisse’s worst, ankle-deep elsewhere

European insurers held, at most, low single digit million sums of the AT1 hybrid debt wiped out during the shotgun marriage of  Credit Suisse top UBS and "very small" sums amongst the rest of the AT1 debt in the banking system, a key equity brokerage said in its latest research.

"Our conclusion is that the European insurers’ exposure is not material at the level of Credit Suisse’s total bank debt, very small at the level of total bank sector AT1s and negligible at the level of Credit Suisse’s AT1s," analysts at the Berenberg investment house said in a note to clients.

Only Aegon, Zurich and Allianz managed to break the million mark for the Credit Suisse AT1 at €3 million, $2 million and €1 million respectively, Berenberg said of its tally.

Zoom out to the broader insurance sector and the full palette of banking sector AT1 bonds and Berenberg finds only 0.16% of solvency own funds exposed.

Only six insurers seem to have topped the 0.20% mark: Sampo at 1.48%, ASR at 0.68%, Generali at 0.46%, Storebrand at 0.40%, Tryg at 0.31% and SCOR at 0.22%. And Sampo, Tryg and Storebrand have all limited themselves to Nordic banks, not likely the epicentre of any continued solvency storm.

Capital requirements for AT1 bank debt, which Berenberg puts near the 39% capital weighting required for tradeable equity, has effectively warded off investment from the insurance sector, Berenberg claimed.

Where insurers do have exposure to Credit Suisse, it has chiefly been in senior unsubordinated. Five insurers likely had neighbourhood 1% of their solvency-qualifying own funds invested in Credit Suisse debt.

Mark Allianz into Credit Suisse to the tune of 1.0% of its solvency own funds, AXA at 1.0%, Direct Line at 1.4%, NN Group at 1.1% and Swiss Life at 0.9%, Berenberg claims. Berenberg had previously calculated Allianz's own funds exposure at a level to have rendered neighbourhood €80 million in mark to market losses year to date through March 15. Not a show stopper, analysts argued.

For its institutional investor clients, Berenberg draws out a few mismatches between recent market performance and risks from a banking crisis.

While the relative outperformers amongst insurers on stock markets during the melee are defensive names such as the Nordic insurers, as well as Admiral, Hannover, Munich, Hiscox and Generali, some insurers with little to nothing exposed in the banking crisis are suffering inordinately.

To wit: Aegon has lost 19% on account of the €3 million of exposure to Credit Suisse’s AT1s and €20 million in other bank AT1, Beazley has lost 14% without a penny of Credit Suisse or bank AT1 on its books, and SCOR lost 11% despite holding nothing from Credit Suisse and only €15 million of total bank AT1.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.