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The panic in commercial property funds is likely to intensify this week, as financial advisers are tipping Norwich Union to be the next asset manager to put a freeze on withdrawals by small savers.
Two other large funds run by insurance companies have already locked in their customers. Insurance company Aegon said last week that investors in its Scottish Equitable property fund may have to wait up to a year to get their money back and Friends Provident introduced a six-month delay on redemptions from its property fund in December.
Founder John Duffield, who owns 12.5 per cent of the company, said he had personally lost £100m in the past six months
FINANCIAL experts last night urged customers not to panic after one of the UK's largest insurers froze its property funds following a run on withdrawals.
Credit crunch fears have prompted investors to pull their capital from the Scottish Equitable Property Fund, leaving it with a depleted reserve which could be unable to deal with further withdrawals.
The situation has prompted fears that members of other schemes could also pull their resources out, in a scenario disturbingly reminiscent of the Northern Rock debacle.
Jan. 19 (Bloomberg) -- Ambac Financial Group Inc., the second-largest bond insurer, was stripped of its AAA credit rating by Fitch Ratings after the company abandoned plans to raise new equity.
Without its AAA rating, New York-based Ambac may be unable to write the top-ranked bond insurance that makes up 74 percent of its revenue. Ambac may quit the business or sell itself, said Robert Haines, an analyst at CreditSights Inc., a bond research firm in New York. The downgrade throws doubt on the ratings of $556 billion in municipal and structured finance debt guaranteed by Ambac.
U.S. banks are taking a beating in the market because of the billions of dollars in subprime mortgages they have on their books. And with the insurers who backed the loans in danger of going belly up, there doesn’t seem to be a bottom for these stocks. If that ever happened, Cramer said, the entire system would collapse dominoes style.
too bad that they too were cutting-corners,
Similarly, Scottish Widows, which has £2bn in life and property pension funds, said it was carefully monitoring outflows, and considering whether it needed to follow Aegon.
A spokeswoman said: "I'm afraid we can't rule it out. At the moment there is no change, but we are seeing withdrawals and after all the speculation and news coverage, the position could deteriorate further, at which point we might well be forced to act."
* Anger at Brown as Rock bill may hit 60 bln stg: UK Prime Minister Gordon Brown sparks a political row by endorsing a deal to bail out Northern Rock with tens of billions of pounds of taxpayers' cash; the plan stops short of nationalising the stricken bank by allowing a private sector company -- possibly Sir Richard Branson's Virgin Group -- to take it over - Sunday Telegraph
* Brown accused last night of a 'final slap in the face to taxpayers' over Northern Rock in a move that could lead to Branson buying the bank at a knockdown rate - Sunday Times
The crisis sweeping the bond insurance industry escalated yesterday as America’s second-biggest bond insurer effectively began to wind itself down by cancelling a plan to raise $1 billion (£511 million) of new capital in a move that sacrificed its AAA credit rating.