Posted on 17 Apr 2009
Moody's Investors Services could downgrade U.S. commercial insurers due to the declining value of holdings and the possibility of increased costs to pay back corporate clients in the case of shareholder lawsuits.
According to Moody's, "Deterioration in investment portfolios, outsized catastrophe losses, and the potential for significant litigation costs relating to corporate bankruptcies and the subprime mortgage crisis all could place additional strain on the sector."
As a result, Moody's reportedly lowered its outlook for the sector to "negative."
Finally, commercial insurers continue to face low profits as the value of investments backing policies diminishes. Meanwhile, firms selling management liability coverage could have to endure rising claims as investors attempt to recover losses resulting from the mortgage meltdown, according to reports.