The penny is slowly dropping that the world's banking system may prove beyond repair. But as talk turns to what might replace it, it is time to start worrying about those with most to lose from the transition to a less debt-dependent economy. Today's warning from Legal & General is just such a moment.
Insurers are vulnerable to the deteriorating state of the banking system because they own lots of company loans. L&G has looked at the £18bn of assets that support its policies and decided that if we do end up with a 1930s style recession, some £650m may never get paid back.
Insurers are cautious folk and today's statement is full of reassurances to policyholders reminding us not to panic. Nonetheless, you can't help but think this is a taste of things to come for the insurance and pensions industry. As my colleague Nils Pratley pointed out last night, the onus is now on the regulators to react without making a difficult situation even worse.
