Whatever the ongoing consternation about U.S. subprime mortgage market and its implications for investors and the economy, the subprime market’s woes seem to be of little immediate concern to the insurance industry, according to the rating agencies.
Last week Moody’s Investors Service Inc. weighed in about insurers’ limited exposure to subprime mortgage-backed investment instruments, and yesterday Standard & Poor’s Corp. offered a similar take.
“Standard & Poor’s Ratings Services has surveyed all the insurance and reinsurance companies it rates globally to determine their exposure to U.S. subprime mortgage-related instruments,” said in its report. “The main conclusion: We expect that these sectors will navigate the recent deterioration in subprime mortgage-related assets with sufficient liquidity to meet their financial obligations.”
S&P said the “vast majority” of insurance companies it rates have “negligible” subprime exposures, and that while a small number of companies had exposures that weren’t negligible, the rating agency considered those companies’ exposures “manageable” because they targeted higher rated classes of instruments in making their investments.
Life companies generally had a higher percentage of subprime exposure, S&P said, though adding that that fact isn’t surprising life insurers’ longer-tailed liabilities, need for longer dated assets and life companies’ pursuits of higher yields. Still, the life sector’s exposure is “relatively modest,” S&P said.
Last week Moody’s said the “vast majority” of U.S insurers have either no exposure or an extremely limited exposure to the subprime mortgage sector. Moody’s based its analysis on a survey of companies and a review of insurers’ statutory financial statements.