Insurers heavily exposed as Enron unwinds
|Enron: who knows what skeletons
The collapse of Enron has numerous implications for the insurance industry, not least on the credit risk side. But identifying them, let alone quantifying them, is not proving to be an easy task - either for the insurers themselves or for the analysts who cover them.
Insurance companies have moved strongly into the credit derivatives business in recent years - writing credit default swaps in particular - and multiline insurers have also moved into the credit enhancement business, which was formerly the preserve of monoline financial guarantee companies such as FSA, MBIA and Ambac.
Enron's messy collapse has triggered a process of unravelling and unwinding the company's derivatives positions that could take several months - and also triggered at least some of the default and bankruptcy contracts in the derivatives markets.
Losses relating to Enron exposure will be felt extensively throughout the insurance and reinsurance industry, quite apart from straight investment losses.