Insurance companies have not worked out how they would cope if the US debt is downgraded, according to Lloyd’s chairman Lord Levene.
The US is at risk of defaulting on its debt payments if it does not raise its debt ceiling by next Tuesday.
“ We and all others have a pretty wide spread of [US] investments. [A downgrade] would be pretty significant,” Levene said in an interview with Reuters. “Nobody, I think, has factored in what will happen if US government debt, which has been regarded as a very safe haven, wasn’t that safe anymore.”
The two sides of US Congress are still at loggerheads over raising the US debt threshold. If the currently Democrat-controlled Senate and the Republican-controlled House of Representatives fail to agree to raise the threshold by 2 August, the US will effectively be in default.
Levene said in the interview that those outside the US found the tit-for-tat battles between Democrats and Republicans over the debt ceiling bewildering . “Frankly to us on the other side of the world it is incomprehensible – we just don’t understand it,” he said. “The dollar, whether we like it or not, is the world trading currency. “
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