Ratings agency says credir drunch will hit Lloyd's in the second quarter.

Lloyd’s insurers are set to take a hit from the credit crunch in the second-quarter results season, Standard & Poor’s said this week.

Financial performance will depend on astute investments in the coming results season, at a time when equity markets show little sign of rebounding amid falling share values, the analyst said.

S&P analyst Mark Nicholson told Insurance Times: “Investments will probably hit balance sheets, especially in the second-quarter. Investment mix will make much of a difference to profit levels.”

But S&P analysts sounded an optimistic note after highlighting hidden opportunities for insurers in the current economic climate.

In a report analysing the effects of financial markets on insurers, S&P said: “One of our conclusions regarding the more direct effects of the credit crunch is that the insurance sector could be well placed, in the context of unmet demand for longer-term liquidity and widening credit spreads, to be paid more for supplying that liquidity.”

The report added that: “We recognise that, to varying degrees, price weakness in insurers’ existing holdings of financial assets will be the focus of attention but, as the primary holders of long-term liabilities, they should also be the natural buyers of long-term credit market assets.”