Economic crisis in Greece to affect insurers' balance sheets

Tim Kirk, partner at BDO LLP, said if Greece defaults on its payments, it could weaken insurers’ balance sheets.

It could also mean that small EU states like Portugal and the Republic of Ireland may have to default on payments too, causing the cost of borrowing from the EU to rise and exposing insurers to greater risk.

Mr Kirk commented: “UK and European banks have massive exposure to sovereign debt in Greece, Ireland, Spain, Portugal and Italy which is now at even greater risk.

“Global insurers rely heavily on sovereign debt to balance their long-term abilities and despite efforts at de-risking, it’s not clear how strong their balance sheets will be to massive defaults spreading across the system.”

Greece needs a £12bn loan to avoid defaulting on its repayments. It received a multibillion pound bail-out package in May last year to avoid bankruptcy.