Some European Insurers Could Face Heavy Losses

Insurance companies across Europe are sitting on large portfolios of bonds issued by financially shaky governments and banks, raising concerns that some insurers could fall victim to the Continent's financial crisis.

Before Europe's fiscal crisis erupted last spring, many insurance companies gorged on bonds issued by governments and banks from around the euro zone. It seemed like an easy and low-risk way to generate higher returns for investors and policyholders. Today, though, Greece is teetering on the brink of default, and many investors fear that Ireland, Portugal and even Spain could follow suit. Meanwhile, troubled banks increasingly are imposing losses on bondholders as a way to avoid taxpayer bailouts.

The result: Some European insurers face the prospect of heavy losses, which could erode their financial strength and trickle down to customers who hold life-insurance policies, according to industry executives, regulators and analysts. And because of the industry's limited disclosures, it is hard to pinpoint individual insurers' vulnerability.

Analysts say that among the most exposed companies is Dutch-Belgian insurer Ageas NV, which until last year was known as Fortis. Other companies holding large quantities of government bonds from risky euro-zone countries include Germany's Allianz SE, Italy's Assicurazioni Generali SpA and France's Groupama SA.

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