Swiss Re hit by sub-prime losses

Swiss Re's UK office is based in the distinctive building of the same name

Swiss Re expects to lose 1.2bn Swiss francs ($1.07bn; £525m) on insurance cover a client took out against any fall in the value of its mortgage debt.

Such investments have fallen sharply in value since the summer, due to the crisis in the US mortgage industry, centred on the sub-prime sector.

Swiss Re did not give the name of the client company which may be a bank.

Record levels of home loan defaults in the US sub-prime sector has hit the value of all mortgage debt.

This is because much of the sub-prime debt has been repacked into wider debt offerings, called collateralised debt obligations, which were then resold on the global market.

Swiss Re, the world's largest reinsurance company, said it was now working to improve its financial risk-taking.

A growing number of global banks have now revealed over $60bn in potential losses due to exposure to bad US mortgage debt, and some estimates suggest that the total losses in the financial sector could exceed $400bn.

Several other insurance companies which have specialised in covering such debts are now facing questions about potential losses.