Insurers among least affected financial institutions by subprime storm

Insurers continue to emerge from the credit crisis in a strong position and are among the least affected of all financial institutions, a senior ratings agency official told the Casualty Actuarial Society (CAS).Jeffrey Berg, senior vice president and group credit officer with Moody’s Investors Services, told the CAS “very strong current financial profiles will enable most insurers to handle these [subprime-related] losses, and few rating downgrades driven solely by credit market concerns are expected.” But he cautioned that insurers with outsized investment losses, combined with industry pressures, could prompt downgrades for weakly positioned firms, the CAS reported.Rated property and casualty insurers’ exposure to non-agency-structured mortgage investments is moderate, with a median of 12% of invested assets and 47% of equity, he told the actuaries. The exposure to structured mortgage investments from riskier borrowers is modest, with a median of 4% of assets and 17% of equity, he added.Berg did note other, ancillary consequences for the insurance industry. They include a negative impact on professional lines, such as directors and officers’ liability and errors and omissions losses from litigation-related to mortgage lenders.”The market’s view of insurers has deteriorated, somewhat constricting their financial flexibility, but much less than with other financial institutions,” Berg told the CAS.