What is the impact of Credit Suisse’s rescue deal on insurers?
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Following the collapse of Silicon Valley Bank earlier this month, Swiss bank Credit Suisse was taken over by UBS on Sunday for $3.25bn (£2.65bn) in an all stock deal. Experts believe the collapse of SVB has little impact on US insurers, but what about their exposure to CS?
The troubled Swiss bank has been embroiled in crises for a while. According to the Swiss Financial Market Supervisory Authority, FINMA, CS experienced “a crisis of confidence, which has manifested in considerable outflows of client funds. This was intensified by the upheavals in the US banking market in March 2023.”
To protect depositors and the financial markets, the offer by UBS to take over CS has proven to be "the most effective solution", said FINMA.
On the underwriting side of insurers’ balance sheets, ratings agency AM Best believes the bank’s troubles have little impact on insurers but warned that, depending on policy wording, certain contracts could trigger insurance payouts.
Sridhar Manyem, senior director, industry research and analytics at AM Best, said: “As of now, underwriting impacts should be minimal, if there are any, because of the UBS deal. However, an unplanned sudden collapse could have had multiple impacts on business interruption, financial lines or the trade credit segment, depending on the policy language, as well as directors and officers’ exposure for insurers that cover Credit Suisse.”
On the asset side, Manyem said insurers continue to be well diversified on an individual holding basis as a percentage of surplus, “so the impact is manageable”.
Should insurers need to worry about further banking failure?