Credit Suisse forced to bail out Winterthur

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Credit Suisse yesterday became the latest financial services company to bail out a struggling life assurer subsidiary with an announcement that it had injected Sfr600m (£275m) into Winterthur.

Credit Suisse also raised £500m earlier this month, through a bond issue, that will go to the insurer, which operates in the UK and Europe.

The giant investment bank said it is pouring the cash in to help its insurance division maintain regulatory solvency margins. Winterthur's financial strength has suffered from the general malaise in stock markets and from the low level of confidence in insurers shown by consumers.

Credit Suisse said it had acted after Winterthur's solvency margin was eroded further in recent weeks by the continued falls on stock markets. This is the latest example of companies bolstering their insurance businesses. Abbey National last year injected funds into Scottish Provident and Lloyds TSB has helped Scottish Widows. Others without parents with deep pockets are considering shutting to new business.

Winterthur, which provides life and general insurance, has to satisfy both the Financial Services Authority and Swiss regulators about its solvency. The company would not comment on whether it was prompted by regulators to boost its underlying capital, but it said in a statement: "In co-ordination these two transactions will ensure that Winterthur retains an adequate capital base."

As well as boosting the life arm, which has been most exposed to the downturn, half of the extra capital will be directed towards Winterthur's general insurance business. On the non-life side, the new capital will help support the growth of new business, which has been experiencing rate rises after the 11 September attacks.

Insurers across Europe and the US have seen assets eaten away as a result of the downturn in stock markets and regulators in different countries are monitoring the situation more carefully than in the past. Earlier this week the FSA said a number of insurance companies were at risk of breaching solvency requirements.