After downgrading U.S. government debt in Friday, ratings firm Standard & Poor’s also hit 10 insurers with downgrades on Monday,
Despite the hullaballoo, the downgrades are likely to have little impact on the operations of U.S. P&C insurers, says Robert Hartwig, an economist and president of the
I.I.I. estimates that total invested assets (including cash) held by P&C insurers exceeded $1.3 trillion at year-end 2010, and that holdings of U.S. Treasury bonds accounted for roughly 6 percent of the industry’s total invested assets. However, as sellers of annuities, life insurers may face a greater risk as rapidly rising interest rates could devalue fixed-income assets.
One group that need not fret about the financial strength of the insurance industry is policyholders. I.I.I. notes that the P&C industry’s policyholders’ surplus was a record $556.9 billion at year-end 2010, providing a substantial financial cushion. “Existing policyholders, people and businesses filing claims and those seeking to purchase insurance will not experience any difficulties arising from the downgrade,” Hartwig added.