Lloyd's of London 'plans for euro collapse'

The chief executive of Lloyd’s of London, Richard Ward, has admitted that the insurance market is preparing contingency plans in case the euro collapses.

In an interview with the Sunday Telegraph, Mr Ward said that Lloyd’s needs to prepare for every eventuality and that it would settle claims using individual currencies.

Lloyd’s of London is an insurance market that matches syndicates with brokers who agree to take on projects with specific risks.

Greece will have secondary elections in June after the election earlier in May failed to establish a clear winner. The majority of the electorate backed parties that do not support the austerity regime that is the price expected of Greece in return for the bailout funds advanced by the euro.

Depending on the result of next month’s election, Greece could be forced to leave the eurozone. If the leftist bloc Syriza wins the election this would be the likely outcome.

Mr Ward, who is one of the first bosses of a large UK firm to publicly admit that he is making plans to deal with the collapse of the euro, said in the interview: "We've got multi-currency functionality and we would switch to multi-currency settlement if the Greeks abandoned the euro and started using the drachma again.

"I don't think that if Greece exited the euro it would lead to the collapse of the eurozone, but what we need to do is prepare for that eventuality."

Last year, 2011, Lloyd’s of London announced its biggest ever loss of £516 million, caused by disasters such as the earthquake and tsunami in Japan and the earthquake in New Zealand.

Mr Ward’s comments follow warnings from politicians and central bank’s that they are preparing for a Greek exit from the euro.

Last week, the Bundesbank, Germany’s central bank said that a Greek exit would be “painful but manageable.”

The International Monetary Fund (IMF) has also acknowledged that plans are in place should Greece leave the euro.

A further risk is that should Greece leave the euro it could trigger a run on Greek banks and others in the troubled southern European countries of Spain and possibly Portugal and Italy if a possible run on banks materialized and proved contagious.

If Greece were to exit the euro, it may encourage other countries to follow suit in a bid to improve their own economic situation.

On Friday, Spanish bank Bankia announced that it required a further €19 billion in bailout funds from the Spanish government.

Free guide to savings and investing

Follow Myfinances.co.uk on Twitter: @news_myfinances

Sign up to the Myfinances.co.uk newsletter to receive the latest financial news direct to your inbox.