AAA insurers could withstand U.S. downgrade: Moody's

NEW YORK (Reuters)—Insurers with the highest credit rating could probably withstand a one-notch cut in the United States's sovereign credit rating without having their own rating lowered, Moody's Investors Service said on Wednesday.

Moody's has placed the country's sovereign rating on review for a possible downgrade amid the fight in Washington over raising the debt ceiling and tackling the deficit.

Last Friday, Moody competitor Standard & Poor's Corp. said a whole range of financial companies, including AAA-rated insurers, could be downgraded if the United States suffers a ratings cut.

A.M. Best has also said it was stress-testing insurers to see how they would fare if the United States was downgraded, and it is also considering cutting its ratings outlook on the entire U.S. life and annuity sector.

But Moody's adopted a slightly different view, saying the four insurers it has assigned a top-tier credit rating could survive a small U.S. downgrade intact. The four are New York Life, Northwestern Mutual Life, TIAA and USAA.

"Moody's believes that the linkages between an insurer's credit profile and that of the sovereign should limit the insurer's financial strength rating to one or two notches above the sovereign bond rating," the agency said in a statement.