European insurers have proved more resilient than their banking counterparts in the current financial crisis, but are still vulnerable to economic shocks, Moody's said today.
"The European insurance model has thus far proven to be better insulated from the current stressed environment," a report by the ratings agency said.
While conceding that a like-for-like comparison of the credit profiles of banks and insurers faces many challenges, Moody's highlighted a number of features which make insurers better able to cope with disruption in the wider economic system.
Because insurers' business models have minimal reliance on capital markets, particularly for funding, they are consequently less affected by short-term capital market volatility, Moody's said.
In addition, insurers generally display stronger intrinsic liquidity profiles and tighter asset-liability management.
The compulsory nature of some insurance businesses, such as motor insurance, also provides insurers with revenue and profit stability, despite difficult macroeconomic conditions.
Reflecting these features, the standalone credit profiles of Moody's-rated European insurers have deteriorated less than those of European banks over the past five years and the firm believes that the comparative resilience will continue.
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