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Life insurance sales across Europe have been cut drastically during the Euro crisis, and the flight to safer assets has driven the 10-year German bund down to just 1.5%, writes the Wall Street Journal’s Hester Plumridge. Both of these factors have led to insurers’ investment returns getting crushed.While many insurance companies have actively reduced their exposure to Greece, they are nevertheless still exposed. From Plumridge:
Europe’s insurers have been rapidly reducing their Greek exposure. The value of Greek sovereign-debt holdings at 16 of 28 groups tracked by J.P. Morgan more than halved in less than a year, to about €4.5 billion ($5.73 billion) at the end of 2011.
And while the potential consequences of a Greek euro exit—huge bank losses and company defaults, pressure on other countries to leave the currency—are hard to predict, insurers look highly exposed as some of the Continent’s largest corporate debt and equity investors. Holdings of bank debt alone are often more than half the value of their shareholders’ equity.
There are a lot of good reasons for Greece to exit the Euro, but insurers are one group that can see a big hit to their pockets if a Greek exit actually does happen.