A.M. Best has been monitoring the insurance industry exposure in the subprime mortgage crisis since August 2007
According to the December 13, 2007 press release A.M. Best said "Given the diversity of life/health insurers’ asset portfolios and their enhanced risk management practices, A.M. Best does not expect, at this time, to take negative rating actions due to the effects of the subprime crisis, with the possible exception of a handful of companies with above average average exposure".
Generally A.M. Best is concerned about the lack of pricing clarity on mortgage-linked securities and its contagion effect on the pricing of other asset classes. The release stated that "evolving capital market conditions and the potential for increased economic risk and its impact on investment returns will likely remain the dominant investment theme for many U.S. insurers".
A.M. Best remains confident however, despite these concerns, in the overall strength and flexibility of U.S. insurance company balance sheets, observing generally modest exposure to subprime investments that seem to be concentrated in the highest credit quality tranches. A.M. Best will continue to monitor the investment environment and what impact exposure to mortgage-related investments will have on insurers it rates.
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