European credit insurers would be less able to rebound in a future crisis than they were in 2008/2009, according to Moody's latest insurance industry outlook.
Despite being less vulnerable than in the previous crisis owing to greater capital resilience, insurers would find it more difficult to recover if there were another serious crisis, Moody's believes.
"After the severe 2008-2009 crisis, credit insurance companies increased prices significantly, and credit insurers reduced their exposures significantly," commented Moody's senior analyst Benjamin Serra.
"This created a lot of dissatisfaction among policyholders. If this happened again we think many policyholders would choose not to be insured, and this would hurt credit insurers' franchises.
"Therefore, we believe it would be more complicated for credit insurers to act in the same proportion next time, so their ability to recover would also be reduced."
Moody's also noted increasing pressure from clients and brokers for policies with non-cancellable limits, which it termed "very negative" as it limits the flexibility that is an important part of credit insurers' business models.
"In most credit insurance policies the company has the right to cancel the exposures on a specific counterparty with very short notice," said Serra.
"This is a very efficient risk management tool which enables credit insurance companies to quickly reduce the risks they are taking on this counterparty. If they lose this important tool they will be carrying more exposures on their books, which could have a negative impact on their risk profile."
The challenging economic environment is global, but the threat of insolvencies is particularly heightened in Europe, where the three biggest credit insurers - Coface, Euler Hermes and Atradius - have most of their exposures, Moody's said.
Asked whether specific countries posed higher risk for credit insurers, Serra said the main risk for credit insurers is the severe slowdown of economic growth, putting countries like Spain and Italy more at risk.
In terms of sectors, he said that cyclical sectors such as construction are more at risk.
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