Subprime unlikely to cause big insurance claims

MONACO (Reuters) - The insurance industry is unlikely to face a flood of major claims as a result of the subprime mortgage crisis, a leading insurer said on Sunday.

Henry Keeling, chief operating officer of XL Capital Ltd (XL.N), one of the largest Bermuda-based insurers, said in an interview on the sidelines of an industry meeting here that he expected the industry's exposure to be manageable.

Insurers and their reinsurers, who assume risks too large or volatile for insurers to retain themselves, are likely to pay claims resulting from lawsuits involving banks, auditing firms and rating agencies, Marsh Inc. (MMC.N), the world's largest insurance broker, warned earlier this month.

"On subprime, there's clearly exposure to both the insurance and reinsurance markets," said Keeling.

"It's very early days to say how much there will be, but our expectation is that it's very containable."

A crisis in U.S. subprime mortgages has led to a global credit crunch as investors are fearful that the loans, which were repackaged and sold on as asset-backed securities around the world, could cause financial institutions big losses.

Potential litigation could include lender lawsuits against banks because some lenders have been forced to file bankruptcy when asked by banks to buy back loans, and shareholders may sue lenders who go into bankruptcy or see their stock prices plunge, along with their auditors and trustees, Marsh said.

Insurers, who cover company executives against shareholder or regulatory lawsuits claiming neglect or misdeeds, may be exposed to claims that could run into tens of millions of dollars, some analysts have speculated.

XL's own exposure to subprime assets in its investment portfolio, which it said in July amounted to $1.2 billion, was not "meaningful", Keeling said.

"In the context of our overall portfolio it's not a material issue." The investments represent only 3 percent of XL's fixed-maturity assets and most of that is in the highest-rated securities, it said in July.

Reinsurers are meeting their insurance clients in Monaco to kick off annual negotiations on the price and terms of risk cover contracts they offer.