Stand

News that so called ‘short selling’, the act of selling shares which traders do not own in the hope of buying them back at a lower price, has been banned by both US and UK regulators for the short term at least has received a warm welcome. Many had blamed this disruptive activity for the demise of HBOS over the last few days and the near terminal injuries suffered by US insurance giant AIG.

While AIG has been saved by the US government with a multi-billion dollar takeover there were grave concerns that the insurance sector would have become the next target for the rumour mongers and the short sellers, something which could have pushed many major groups to the brink. Even though there are still concerns about the balance sheets of insurance companies in the UK and the US they should now be able to concentrate on rebuilding their finances as oppose to fire fighting all kinds of rumours and scare stories in the markets.

To date the UK insurance sector has managed to stay out of the headlines but there are concerns that many are holding what are now referred to as ‘toxic’ investments which have the potential to reduce company balance sheets to shreds and pile up liabilities which many investment companies had never even considered.