FIRE Podcast- Robert Hartwig: Insurers and the Eurozone crisis
Economic problems in Europe, and particularly the sovereign debt problems faced by several members of the Eurozone, pose a serious risk for the U.S. economic outlook, Deputy Assistant Treasury Secretary Mark Sobel said in Dec. 16 testimony before a House subcommittee.
All told, the European Union buys 20% of U.S. export goods, 30% of U.S. services exports and accounts for 63% of foreign direct investment in the United States, Sobel added in noting that slowed growth in Europe is bound to have some impact on the U.S. economy, as well.
It remains uncertain the degree to which the continent’s political and economic problems will spill over into the global insurance markets. Swiss Re, the world’s second largest reinsurer, has estimated that defaults by Greece, Portugal, Spain and Italy could wipe out as much as a quarter of shareholder equity at European insurers. Meanwhile, citing Eurozone concerns, insurance rating agency A.M. Best has placed U.K. life insurer Aviva and French reinsurer CCR under review, while downgrading German insurer Allianz, Italy’s Generali and Spain’s Mapfre.
But Robert Hartwig, president and economist of the Insurance Information Institute, believes fears of significant impact from the Eurozone crisis on U.S. insurers are largely overblown. In this week’s edition of the FIRE Podcast, we talk to Hartwig about insurers’ potential investment exposure to Europe, as well as the potential consequences on trans-Atlantic insurance trade should the crisis grow considerably worse.