Willis: General Insurance Sector Sees Limited Impact Thus Far
From Credit Crisis
London, UK, October 20, 2008 – The general insurance sector has seen limited
impact from the current credit crisis, with carriers having relatively limited exposure to
subprime investments and relatively few experiencing negative ratings actions,
according to a new report by the Market Security team of Willis Group Holdings
(NYSE: WSH), the global insurance broker.
The Willis report notes that unlike banks, general insurance companies did not play a
key role in each link in the chain of transactions that originated mortgage loans and
subsequently bought, warehoused and distributed the derivatives to investors
throughout the financial sector. The report also highlights that the investment
portfolios of general insurance companies typically contained smaller proportions of
subprime-exposed collateralised debt obligations and less mortgage-backed
securitisations compared to banks.
Commenting on the findings of the paper, Sally Bramall, Managing Director of
Global Carrier Management at Willis, said, “The general insurance sector as a whole
appears to have remained relatively isolated from the direct impact of the credit crisis
so far. Whilst there have been some notable exceptions, these have been companies
that have stretched the boundaries of traditional insurance, assuming more of a
‘financial superstore’ structure.”
The paper goes on to highlight three indirect impacts of the credit crisis on insurers
that may become more apparent in third-quarter earnings reporting, including: falling
investment income due to deteriorating returns, increased E&O and D&O claims
related to subprime litigation, and adverse investor sentiment against the entire
financial sector.
The Willis report concluded that there will inevitably be some wider impact on the
investment portfolios and investment returns of general insurance companies, which
will become evident throughout the upcoming reporting seasons. It noted that with
the anticipated moderation in the soft phase of the insurance cycle, the relatively
stable rating outlook for the general insurance sector currently appears reasonably
justified, but will inevitably be subject to review as financial market turbulence and
attendant market sentiment plays out over the coming months.
Willis Group Holdings Limited is a leading global insurance broker, developing and
delivering professional insurance, reinsurance, risk management, financial and
human resource consulting and actuarial services to corporations, public entities and
institutions around the world. Willis has more than 400 offices in nearly 120
countries, with a global team of approximately 20,000 Associates serving clients in
some 190 countries. Additional information on Willis may be found at
www.willis.com.
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Note to Editor: To view the full report go to:
www.willis.com/Documents/Publications/General_Publications/Willis_Market_Securit
y_Report_20_October_2008.pdf