The impact of the financial crisis has mainly been offset by a hardening of the insurance cycle, say industry experts

The insurance industry is in a stable position, despite significant asset write downs and plummeting stock markets, according to industry experts speaking on an AIRMIC Live conference call.

The outlook for the non life insurance sector is stable thanks to good capitalisation, conservative investment portfolios and sophisticated capital management, said Miles Trotter, general manager of analytics, A. M. Best Europe.

‘I don’t expect large scale downgrades this year as a result of the crisis. I wouldn’t say there is any need to panic at this stage,’ he said, noting that major insurers have not withdrawn from the market. ‘AIG, XL and Swiss Re are all still trading, despite their difficulties.’

Trotter acknowledged that segments of the market have been adversely affected by the financial crisis, such as protection and indemnity (P&I) clubs, which rely more on investment returns. But overall good underwriting performances have so far offset poor investment returns, he said.

‘Capacity generally has not been impacted. There is still an oversupply,’ said Matt Grimwade, head of risk transfer at Aon. The impact of the financial crisis has mostly been offset by a favourable turn in the insurance cycle, he said, adding that to remain profitable insurers will no longer be able to rely on good investment returns.

‘Insurers’ investment portfolios have been hit and they need to rebuild their capital base, which will have an impact on rates,’ said Philippe Gouraud, senior vice president, head of major accounts practice, AIG UK.

The impact of the recession on the amount of business available to insurers could also dent their profitability, he said, adding that insurers with a disciplined approach to underwriting should not have a liquidity problem.

The insurance market is expected to harden over the course of 2009. Today, most professional lines have experienced single digit growth in premium rates, but there has been a bigger increase in loss affected classes, added Trotter.

AIRMIC is planning a series of similar conference calls to debate issues in the insurance market.