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The Actuary The magazine of the Institute & Faculty of Actuaries

Insurers under least threat from Eurozone debt default

E&Y warned that without a seven-fold increase in the €440bn of resources available to the Eurozone Financial Stability, Eurozone GDP could fall by up to 2% in 2012 and a further 1% in 2013. The firm warns there is a 20% probability of this happening, but considers insurers to be the most insulated financial services firms.

E&Y said: "Most insurers and reinsurers have substantially reduced their exposure to Eurozone-periphery sovereign debt, which has insulated the sector against the impact of a potential default."

Marie Diron, economic advisor to Ernst & Young Eurozone outlook for financial services forecast said: "In addition to having reduced their exposure to sovereign debt, Eurozone insurers do not appear to be heavily involved in the provision of CDSs on peripheral countries' debt, which makes the insurance sector the best positioned within the financial services industry to weather a default scenario.

"However, individual insurers' indirect exposures, including extensive exposure to the banking sector, will influence how well insulated firms are against a default scenario."

Source: Postonline