This story was updated on 2 July with comments from S&P
European insurers' marginal holdings of Greek government debt would shield the industry from the direct impact of the sovereign's default, rating agencies have s said, adding that firms could be vulnerable to secondary effects.
Greece is on the brink after its bailout programme expired on 30 June and it missed a €1.6bn ($1.8bn) payment to the International Monetary Fund (IMF). An extensive default would represent significant blow to official creditors – the IMF, the European Central Bank and Eurozone members – and private lenders, who own €242.8bn and €38.7bn in Greek government bonds, respectively.
Insurance companies are largely insulated against that scenario, though.
"Moody's rated insurers in Europe and the UK have minimal or no direct exposure to Greece in terms of their operations or investments. We don't anticipate that the current events in Greece will directly impact insurers' credit profiles." said Antonello Aquino, associate managing director at Moody's.
Since the height of the euro crisis, during which several firms were forced to make material impairments, insurers have kept their holdings of Greek sovereign debt at marginal levels.
German insurance group Allianz said its total exposure to Greek bonds and stocks stands at around €10m, less than 0.002% of its €665bn asset portfolio. Italian insurance group Generali, which has a subsidiary in Greece, said in May it holds about €8m in Greek sovereign debt.
Swiss insurer Zurich and UK insurance groups Legal & General and Prudential had no exposure to Greek sovereign bonds at the end of last year, according to their financial filings.
Even Greek insurers seem well-positioned to weather the shock. In a report on the consequences of Grexit, Standard & Poor's (S&P) pointed out that while some of the largest Greek insurers are owned by rated foreign insurance groups, their direct exposure to domestic Greek assets is a small proportion of the total investment portfolio.
"We observe that some of the local Greek subsidiaries of these groups invest the majority of their assets outside of Greece. This reduces the direct credit risk in their asset portfolios and provides a degree of balance-sheet protection from currency redenomination risk," said Mark Button, primary credit analyst at S&P.
While insurers could survive the default unscathed, it is unclear whether they could easily endure the shockwaves that event would send through the financial markets.
Andreas Gruber, chief investment officer of Allianz Investment Management said that markets have reacted to political developments over the past few days in a moderate way, which stands in contrast with the panic seen in 2011 and 2012.
"This proves that the risk of a ripple effect of the insecure situation in Greece is now much lower than it once was. We do not expect the capital markets to drop drastically, even though the volatile development is likely to continue."
S&P's Button said there has been a general trend for insurers in the core Eurozone countries to reduce exposures in the periphery in recent years, reducing the investment risks that could result from a country leaving the Eurozone.
Moody's said it is monitoring any potential secondary impact on the industry.