Insurance market Lloyd's cuts European debt exposure

(LONDON) - The Lloyd's of London insurance market said Wednesday that it has slashed its exposure to European government debt and pulled cash out of some of the region's banks amid the deepening eurozone crisis.

"Given the uncertainty around the eurozone, it's only natural that we would seek to reduce any potential downside risk," Lloyd's Finance Director Luke Savage told Dow Jones Newswires on Wednesday.

"As a result, we're not holding government debt of any peripheral EU country and have sought to reduce our exposure to banks in these countries."

The eurozone sovereign debt crisis accelerated this week amid intense speculation that troubled Greece was on the brink of default.

The International Monetary Fund and the European Commission warned Tuesday about the health of European lenders exposed to Greece's debt mountain and indicated that their capital levels should be hiked.

Sentiment took another heavy blow after Italy was slapped with a sovereign debt rating downgrade from Standard & Poor's.

Many analysts say that Italy and Spain could be the next dominoes to fall in the fast-moving eurozone crisis, which has so far witnessed enormous bailouts for debt-ravaged Greece, Ireland and Portugal.

Earlier on Wednesday, Lloyd's revealed that it had plunged into first-half losses due to an unprecedented number of major natural catastrophes including the Japanese earthquake and tsunami.

The company made a pre-tax loss of GBP 697 million ($1.09 billion, 800 million euros) in the six months to the end of June, as it was hit by soaring claims.

That compared with a profit of GBP 628 million in the same period of the previous financial year.