ISE 2012: Portugal to follow Greece but sovereign defaults won’t ‘cripple’ insurers

"The problems with Greece will be back, but Spain and Italy look more hopeful. Greece is not sustainable and it will see restructure in a few years. However, Switzerland and Germany are doing well in terms of economic recovery," Karl told delegates at the inaugural Insurance Strategy Europe event in Brussels.

"There has been a huge shift in stress in the system in Europe. The big news is that restructuring for Greece is good, but structural reform is needed. Portugal will be the focus once the Greece situation has stabilised.

"The potential effects on European insurers are manageable, but this gets worse if banks get involved.

"The European insurance sector has stress on it, but it is also a low-yield environment. A major series of sovereign defaults would hurt but not cripple the industry."

Karl predicted that the weak economic environment and euro debt would continue to create uncertainty and market volatility.

"Insurance premium growth will be modest and profitability reduced, but the current environment is not a solvency issue for the industry," he said.