Insurer shares fall as Spanish debt hits euro-era highs

Insurer share prices dropped yesterday as investors feared the €100bn European bailout of Spain’s banks would wreck its sovereign finances, potentially sucking insurers into the maelstrom.

Aviva’s share price rocketed to 285p from 272p in just a few hours on Monday morning as markets believed that the €100bn bailout of the Spanish banks might help pull the country away from the jaws of the eurozone crisis.

However, all those gains have been wiped out in the past two days as investors fret that Spain, which will have to pay for the bailout via its sovereign finances, is heading for insolvency and a much larger bailout which could also drag Italy and even France into danger.

Spain 10-year bond yields hit a euro-era high of 6.8%, a level that is deemed unsustainable without intervention from the European Central Bank or assistance from the bailout funds. Italy’s 10-year bond yields climbed past 6%.

Aviva’s share price dropped 1% yesterday falling to 266p. AXA’s share price fell nearly 2% and Allianz dropped 0.63%.