Swiss Re emerged as the latest casualty of the sub-prime crisis yesterday after a SFr1.2bn (£525m) loss on two complex credit default swaps. The news pushed its shares down 10.25 per cent to close at Sfr87.55. Financial Times

The Zurich-based group had expressed confidence about its underwriting and investments as recently as its third-quarter results this month.

Swiss Re’s net SFr981m loss stemmed from two related swaps written by the credit solutions unit, part of a division headed by Roger Ferguson, a former US Federal Reserve board governor.

Swiss Re said that while the products had been constructed to protect against the 'remote' risk of loss, the 'unprecedented and severe ratings downgrades . . . in October' had resulted in a 'significant . . . reduction in the value of the underlying assets'.

George Quinn, chief financial officer, declined to name the client, but said the damage was limited to a unique product. Separately, he revealed Swiss Re faced write downs of about SFr200m on investments this quarter, but described that as minor against its SFr170bn book.

'While the majority of the exposure is to prime and mid-prime securities, there is exposure to sub-prime and, more importantly, to asset-backed securities in the form of collateralised debt obligations,' the bank said.