No US assistance for UK insurers
by David Masters
Story link: No US assistance for UK insurers
US Treasury Secretary Henry Paulson has told British insurers that they are not entitled to state aid from the US government.
Paulson said that government funds would be given to ‘federally regulated financial institutions that lend money’, meaning that only banks are eligible for rescue packages.
AIG, the world’s biggest insurer, was nationalised by the US Treasury, but Paulson is adamant that this was a one-off and not a license for insurers to request government money.
Some of the biggest names in British insurance, including Aviva, Prudential, Friends Provident, and Standard Life, have seen share prices plummet this month.
The sharp falls in stock came despite reassurance from insurers that they have the financial strength to weather the current storm.
The fact that UK insurers felt the need to go hat in hand to the US government is expected to further shake an already shattered confidence in the financial sector.
In addition, the Financial Services Authority (FSA) has warned UK insurers that they must pay more attention to the increased risk of corporate bond defaults.