European insurers suffering losses from sovereign debt writedowns could pass the burden onto their policyholders.
A majority of bonds held by insurers in the European Union are used to back “with profits” life insurance policies, in which gains and losses are shared by both the customers and insurers. That means insurers could pass losses from Greek, Spanish, Italian, Irish and Portuguese bonds onto customers.
How much? Policyholders could end up paying 235 billion euros ($335 billion USD). And many of them will likely be surprised — experts say customers are often badly informed about the risks involved with these types of policies.