Axa and Aviva have exposure
Insurers have been assessing their potential exposure to claims and investment losses arising from an alleged $50bn (£32.5bn) Wall Street fraud that has been dubbed the world’s largest swindle.
Insurers of financial institutions could have to pay billions in claims as legal actions are brought by clients against firms who invested in the allegedly fraudulent scheme run by New York financier Bernard Madoff.
Companies operating in this area include AIG, Ace, Chubb and various Lloyd’s syndicates.
Paul Towler, a partner at broker JLT, said: “The litigious environment that prevails means it’s inevitable that financial institutions who invested clients’ assets in Madoff’s funds will face actions from disgruntled clients seeking to recover lost monies. The likely focus will be the level of due diligence performed by the financial institutions.”
He added: “The sheer size of this case means it is hard to predict the volume and value of claims that can be expected in the insurance market.”
The FBI announced last week that Madoff, a former chairman of the Nasdaq share market, had been arrested and charged with conducting an alleged fraud, believed to be a “Ponzi” or pyramid scheme.
Wealthy investors, and banks and insurers, have emerged as victims.
AXA Group said its exposure to the alleged scam was “well below” €100m (£90m). Aviva described its losses as “immaterial”, but declined to specify a figure.
Royal Bank of Scotland has said it could lose £400m, while HSBC warned its shareholders that its losses could be $1bn (£675m).