FEW INSURANCE DOWNGRADES FROM GREEK DEBT EXCHANGE SAYS FITCH

The majority of European insurers will not be downgraded if they accept the EU's offer of a 50% haircut on Greek debt, said rating agency Fitch at the weekend, before last night's announcement by the Greek prime minister George Papandreou that Greece would hold a referendum on the deal. However, some French life assurers are a notable exception, and Fitch expects reduced profits as a consequence of impairments taken on their holdings in Greek bonds and possibly other sovereign debt. Fitch said that exposure varied from assurer to assurer, but its view on the French life sector as a whole was Outlook Negative. Fitch noted that when it first tested the impact of a Greek default (in August 2010), it found that all insurers in its rated portfolio could cope with a 70% loss on Greek sovereign bonds. "Most insurers are in a stronger position now than they were then", said Fitch, noting that many are likely to have reduced their holdings in Greek sovereign debt. UK, German and Italian insurers typically had very little direct exposure to Greek government debt, Fitch said. Meanwhile, European insurer Allianz said that it would accept a 50% haircut on Greek government debt holdings. Chief Financial Officer Paul Achleitner told Der Standard that "you can assume that we are taking part in this". The Institute of International Finance (IIF) estimated that at least 90% of banks would accept the haircut, which comes with a sweetener totalling €30bn to bring on board the private sector. Charles Dallara, who led negotiations with the EU on behalf of the banks and private sector bondholders, told Welt Am Sonntag that he was "very optimistic", but accepted that "some persuasion" would be needed in some areas.