Aviva, Direct Line, Legal & General and other UK insurers should be safe from the current banking sector turmoil, according to RBC, with the sector having little to no exposure to Additional Tier 1 (AT1) debt.
AT1 refers to the bonds held by Credit Suisse, worth €17bn, which were subsequently written down to zero following UBS’ takeover.
While bondholders have been left licking their wounds after the write-down, UK insurers, including Aviva, Direct Line and Legal & General, should be safe given the little to no exposure they had in AT1s, according to the broker.
For example, Aviva held £4mln worth of bank AT1 debt holdings, while bank holdings were roughly £55mln and mainly A-rated and above, while being spread across several names.
Additionally, the insurer has limited exposure to Credit Suisse, with only £18mln of senior debt and no Credit Suisse sub-debt, AT1 or equity holdings, the broker said.