Although the outlook for the life insurance industry has been changed to negative, it is also important to look at individual company situations, say analysts for Fitch Ratings, Chicago, and Moody’s Investors Service, New York, the agencies that recently issued negative industry outlooks.

In spite of the negative outlook, there are many companies that are fairly well positioned in their ratings level, says Laura Bazer, a Moody’s vice president and author of the outlook report. Downgrades on individual companies would depend on a number of factors including risk due to sub-prime related mortgages, Bazer explains.

In the current market, all industries are vulnerable and market concerns could “absolutely have an effect on consumer buying of insurance products,” she says.

“To a large extent, a lot of products are discretionary,” Bazer continues. Consumers may put less in their 401(k) accounts and may have less money to buy life insurance policies or may buy policies with lower face amounts, she cautions. Disability income writers may witness more claims because in difficult economic times, claims usually increase, Bazer notes.

There are also higher hardship provision withdrawals as corroborated by a few companies, she notes.

Additionally, if there are bank consolidations, Bazer says, and, for example, there are 5 carriers on the acquirer’s shelf, then the acquirer could limit or eliminate carriers on the acquired bank’s shelf.

The third quarter could potentially be a difficult one, says Bazer, and if companies have further write-downs of their securities, then they may have to post more capital.

That could create difficulty given the current diminished access to capital in the markets, Bazer says.

But what helps the industry, she continues, is the fact that it started in a “very good place” at year-end 2007, with strong earnings and record-high capital.

Julie Burke, managing director with Fitch, says companies really need to be examined on a case-by-case basis for exposure to troubled assets.

One concern, she says, is that impairments could accelerate in the third and fourth quarters. If the value of securities is lower than what it was when they were purchased, and this has continued for a year or more, then it becomes harder to justify to auditors and investors that those investments will turn themselves around, Burke adds.

Whether a government bailout could help insurers is really too early to say, Burke says. It will depend on what securities the government purchases and at what price those purchases are made, she says.