• Aviva, Legal & General Shares tumble in London trading
  • Pension deficit widens to $1.2 trillion as bond yields drop

British insurers have been left reeling after the country’s surprise decision to exit the European Union jeopardized the value of at least $2.6 trillion of their investments.

Aviva Plc and Legal & General Group Plc, the U.K.’s largest managers of pension assets, tumbled more than 15 percent in London trading on Friday, helping to erase almost 14 billion pounds ($19 billion) from the industry’s market value. Prudential Plc, which generates most of its earnings outside the U.K., was down 8 percent.

“Insurers are highly sensitive to the U.K. vote to leave the EU because of their sizable investments in financial assets,” Charles Graham, a senior industry analyst at Bloomberg Intelligence in London, wrote in a report. They “held 1.9 trillion pounds of assets at the end of 2014, most of them held by long-term savings providers” and are held domestically, he said.

Insurers hold premiums for years before paying claims, helping them accumulate huge bond portfolios to match the long-term liabilities.

Financial markets buckled Friday as Britain’s vote to leave the world’s biggest trading bloc drove the pound to the lowest in more than 30 years and sent U.K. government bond yields tumbling to record lows. U.K. pension funds deficits widened by 80 billion pounds overnight to hit a record 900 billion pounds, according to consultancy Hymans Robertson.

Aviva said Friday that Brexit won’t have a significant impact on operations while its balance sheet has a “low sensitivity to market stress.” Standard Life Plc, which is down 17 percent in London trading, said they had the “required measures in place” to support customers and clients. The Association of British Insurers said the industry is strong and built to protect against market shocks.

Even so, a widening of credit spreads “will ultimately hurt earnings in the sector,” according to RBC Europe Ltd.’s analyst Gordon Aitken. “While bonds are held typically until maturity the marked to market effect will reduce the solvency,” he said.

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