The “conservative” US P/C industry’s exposure to subprime is less than $15bn, says Moody’s
For US property casualty companies, subprime exposure appears low, according to a new report by Moody's Investors Service.
According to vice president Paul Bauer, the report's author: "The vast majority of US insurers have either no exposure or non-material exposure to the subprime mortgage sector."
"Based on our surveys of companies and a review of statutory financial statements, we believe that only a handful of property and casualty insurers have noteworthy levels of investments in instruments exposed to subprime mortgage risk," he states.
"Overall," Bauer reported, "subprime mortgage exposure (through MBS, CDO, CDS and other investments) appears to be minimal, amounting to roughly 3% of shareholders' equity and 1% of total invested assets."
Moody's estimates that total US property and casualty industry exposure to subprime-related investments is less than $15bn.
"These findings are consistent with our opinion that property and casualty insurers tend to generally maintain conservative investment portfolios," the analyst adds, "choosing to take risk on the liability side of the balance sheet, rather than the asset side."