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NEW YORK-The wobbling stock market is unlikely to have much impact on reinsurers or their products, industry observers say.

Reinsurance companies generally do not have large stock holdings, the industry is awash in capital, and financial reinsurance products-whose pricing often is pegged to U.S. Treasury securities-are largely unaffected, observers say.

The biggest potential impact, some in the market say, is that future merger and acquisition deals might be less reliant on stock if the market continues to drift downward.

"Ho-hum," Willis T. King Jr., vice chairman of intermediary Guy Carpenter & Co. Inc., remarked last Wednesday after the market had dropped approximately 554 points and then rebounded about 337 points the next day.

"It would have sobered people" if the market had continued an uninterrupted downward trend, "but a 7% drop, or whatever it was-no big deal," according to Mr. King.

"Reinsurers are not heavily invested in equities as a general rule. I wouldn't think this would have changed anybody's capital structure," said Steven Bolland, senior vp with intermediary Gill & Roeser Inc. in New York.

"Fortunately, it's happening mid-quarter, and hopefully, things will have settled down by the end of the quarter," he added. "If it had happened at the end of September, things might have been a little more exciting. Volatility at the end of a quarter is a bad thing."

Some reinsurers have larger stock holdings than others, but few are expected to change their investment strategies in response to last week's market gyrations.

General Re Corp., for example, is not planning to alter its strategy of maintaining a larger than average stock portfolio, a spokeswoman said.

"Fluctuations like these are not out of the realm of what we imagined when we made the (investment) decision, and (they) would not change our thinking," she said.

In fact, cash-rich reinsurance companies, such as the giant Berkshire Hathaway Insurance Group, for example, might see a falling market as an opportunity to add to their stock portfolios, observers say.

High levels of capitalization are cushioning reinsurers against any damage from drops like last week's: Even excluding Berkshire Hathaway, the largest U.S. reinsurers are writing at a net premium-to-surplus ratio of at most 1-to-1, pointed out James Shamberger, senior vp with the Reinsurance Assn. of America in Washington. Including Berkshire Hathaway, the ratio drops to about 0.6-to-1, he said.

Given this, a decline in stock prices "would probably be looked at as a healthy sign, to sop up some of that excess surplus," Mr. Shamberger said.

Things have changed since the 1987 stock market crash, with insurers and reinsurers now subject to greater rating agency scrutiny and to risk-based capital rules that restrain investments in volatile instruments, pointed out Joanne Stone Morrissey, president and chief executive officer of Firemark Group Inc. in Morristown, N.J.

"Even if you had a 10% market correction, it's not going to hurt. It's going to be like a sprained ankle, not a broken bone," Ms. Morrissey said.

Still, more bad news from Wall Street could lead to changes in the reinsurance market, some industry observers say.

"It's a little bit of a wake-up call to the marketplace," said Raymond A. Dowling, vp with the integrated reinsurance and risk management unit of Towers Perrin in New York.

Reinsurers' surplus growth-and by extension their willingness to compete for business-has been fueled by realized and unrealized market gains, Mr. Dowling pointed out.

If there were a market correction that stuck, "obviously that's going to put some pressure on companies, because some of those unrealized gains have supported some of their underpricing," he said.

Meanwhile, the market swings have had virtually no impact on financial reinsurance products, observers agree.

Pricing of these products is typically pegged in part to investment returns on U.S. Treasury securities or on the London Interbank Offered Rate. While the stock slide created ripple effects in the treasury market, those changes aren't affecting reinsurance pricing.

"Interest rates are gyrating but within a very narrow range," Mr. Bolland noted.

About the only potential impact from the stock market decline may be on future merger and acquisition deals, observers agreed.

A volatile stock market could make it more difficult to complete stock-based acquisitions, Mr. Dowling said.

"If there is a lot of uncertainty about where the market is going, that currency-using your own stock (to make acquisitions)-is going to be more difficult to sell," he explained.

"It could be an issue in the market going forward, certainly," Mr. Bolland agreed.