U.S. life insurers have pretty good financial strength ratings right now – but that could change.

Andrew Kligerman and other securities analysts in the New York office of UBS come to that conclusion in a report on a call with the analysts at Moody’s Investors Service, New York, who track U.S. life insurers.

The average U.S. life rating is about “A1″ – somewhere between A and Aa – but that A1 rating is “weak,” the securities analysts say. “Moody’s U.S. life industry outlook is still ‘stable’ (but with negative bias).”

The main source of optimism is life insurers’ strong balance sheets; the main sources of pessimism are the possibility that the government could somehow keep rates on 10-year Treasuries from rising, and the possibility that the stock market could fall another 10% to 20%.

Life insurers can deal with a short period of low rates, but lingering low rates could hurt, the securities analysts say.

“Gradually rising long-term interest rates (per Moody’s central case) would ease yield pressures, while containing lapse risk,” the securities analysts say.

- Allison Bell

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