Insurers have remained largely unscathed from the problems facing the financial services industry, despite being major players in the financial market, says a report by Swiss-based researcher The Geneva Association.

In the report released last month, Secretary General and MD Patrick Liedtke reveals that insurers have largely escaped the drain on liquidity and credit losses from sub-rime mortgages.

Mr Liedtke says that for insurers “this is no small achievement”. In 2006 the insurance industry had $US18.5 trillion ($28.5 trillion) of assets under management. This placed insurers only slightly behind pension funds $US21.6 trillion ($33.3 trillion) and mutual funds $US19.3 trillion ($29.7 trillion).

Mr Liedtke says regardless of whether a recession scenario plays out or not the main issue remains: “insurers are not banks”.

“Insurance companies and their clients have been able to organise the transfer of risks in an orderly fashion and emergency government action was not needed,” he said.

He says traditional insurers are not impacted by massive losses on financial products, and as such differ from large complex financial institutions (such as AIG and Fortis).

The traditional insurers have shown “remarkable resistance” due to the resilience of their core business model – underwriting risk.
 
But he says this does not mean insurance companies are able to escape generally negative developments of major asset classes. “These are going down in value because of new risk management, a deteriorating economic climate and a generally less optimistic growth outlook, rather than just liquidity issues.”