Investors are viewing insurers with more optimism, although European underwriters remain on the nose, according to Moody’s.

While investors’ perceptions of global insurers improved during the fourth quarter of last year, it is still more negative than company ratings would indicate, Moody’s Global Insurance CDS Index reported.

Insurers outside Europe are perceived as a sounder investment than those within, Moody’s says, with uncertainty stemming from the sovereign debt crisis shaking investors’ confidence.

Much like previous quarters, credit default swap (CDS) spreads on European insurers remained wider than US insurers.

CDS is a form of insurance against loan defaults issued by banks to investors. Buyers of a CDS make a series of payments – known as spreads – and in exchange receive a payoff if a loan defaults.

Widening CDS spreads means the loan is at higher risk of default.

“The median ratings gap of the companies in the index improved slightly, to negative 2.2 notches at the end of the fourth quarter from negative 2.3 notches at the end of the third,” Moody’s VP Scott Robinson said.

“The CDS markets continue to have a more negative view of the insurance sector than our ratings indicate.”

Mr Robinson says risk ratings in Europe seemed to be improving.

“With the caveat that the credit state of Europe is a rapidly evolving situation, the European Central Bank’s refinancing operation appears to have been well received, with more positive sentiment in the European markets spilling over to the US,” he said.

“This has contributed to tightening spreads at the beginning of this year.”

This month Moody’s downgraded the outlook of Allianz, Axa and Aviva to negative from stable.