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Daily Insurance Industry News
Tuesday 23rd of January 2018
August 29, 2007

Sub-prime implications for European insurers

by Gill Montia

Story link: Sub-prime implications for European insurers

Moody’s, which specialises in credit ratings, research and risk analysis, has reported that it expects the US sub-prime mortgage crisis to have a limited direct effect on European insurers.

In its investigations, Moody’s found that for many of Europe’s largest insurers, exposure to sub-prime residential mortgage-backed securities is of a high credit quality overall.

At the same time, the risk analyst found evidence that some large multinational insurers that are based in Europe may have a higher level of exposure than medium and smaller-sized regional operators in the sector.

The report highlights concerns that the current pressures in the credit markets may have damaging consequences.

Moody’s sees the possibility of weak investor confidence spreading beyond purely investments with sub-prime exposure.

This it believes could lead to a slow decline in the market value of corporate bonds and alike, together with reduced liquidity, losses in equity markets, and disturbances in the capital markets.

According to Moody’s, the latter could reduce insurers’ access to debt and equity funding, which in its turn could have negative implications for the financial flexibility of insurance companies.

 

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