Insurance could take reputation hit from downturn

Most insurers remain well capitalised but there could be a reputation impact on the industry as a result of the current financial turmoil, according to the Comité Européan des Assurances (CEA).

The national insurance associations have not reported any severe problems stemming from the financial crisis, said Tommy Persson, president of the CEA. But the worries about the ‘disease’ spreading further were raised by his members.

‘The reputation and the image of the financial services industry has taken a hit, there might be a spill over effect on insurers,’ said Persson, who was addressing insurance buyers at the FERMA Forum.

He continued,’ Liquidity is not a problem for the insurance industry as it is for banks and exposures to those instruments that caused the turmoil is limited.’

That statement was made with the obvious exception of AIG. Massive exposure to losses in AIG’s financial products division in the US forced it to go cap-in-hand to the US government for an $85bn bail-out.

“The reputation and the image of the financial services industry has taken a hit, there might be a spill over effect on insurers.

Tommy Persson, president of the CEA

But Persson assured buyers that there were no signs that AIG was garnering competitive advantage as a result of Washington’s support.

Insurers’ equity portfolios are expected to be hit hard by the economic downturn.

‘This downturn is a concern for insurers, it’s not severe, but the value on the balance sheets of many companies will go down,’ said Persson.

‘Taking into account that the bottom line results of several insurers will decline, that might have an upward effect on premiums,’ he added.