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Yesterday the Greek parliament voted in favour of the last minute debt repayment deal that effectively kept Greece in the eurozone. However, the previous day a damning report from the International Monetary Fund that said Greek debt levels were unsustainable and that the deal currently on the table does not go far enough in offering relief.
A Greek exit from the euro would hit market confidence in the region, according to ratings agency AM Best. However, in a recent briefing entitled Instability In Greece Creates Volatility But Eurozone Insurers Remain Robust it added that insurers and reinsurers operating in the eurozone are well positioned to withstand a continued period of volatility.
While a number of European insurers have stakes in Greece's leading non-life companies, the small size of the Greek domestic market means they have no material exposure to the country's current plight.
AM Best noted that a so-called Grexit might trigger economic and market instability in peripheral eurozone countries, but said that the finances of Spain and Italy are now much stronger than that of Greece. Meanwhile, European insurers have reduced their exposure to Greek sovereign debt since 2012, it added.
While a Grexit is unlikely to have a significant impact on the earnings of Europe's major insurers, there are particular segments within the insurance industry that are showing signs of strain from the Greek troubles, AM Best said.
For example, credit insurance is now more challenging. This has become more pronounced in the last few weeks. Also, reinsurers that have Greek cedents may see outstanding premiums redenominated should The Bank of Greece resort to printing its own currency.
In another paper, London-based law firm CMS London said immediate work needs to be done to address uncertainties in insurance policies.
"There's an urgent need to review policy wordings, with the political situation in a great degree of flux," said CMS partner Stephen Netherway. "The lockdown raises immediate issues of how premium payment obligations may be discharged, whether through risk transfer provisions, and what the legal result is of ongoing non-payment," he said.