Shares of European insurers were among the first to suffer yesterday as fear of war in Iraq swept the markets.
Insurers have recently been vulnerable on two fronts. They are still significant holders of equities, so suffer from any general market gloom.
Insurers have also suffered from fears that falling markets undermine their solvency position. Insurers have been trying to boost solvency by dumping equities. This has made insurers forced sellers in a falling market.
Analysts say the large insurers are unlikely to face solvency difficulties, but some of the smaller companies could be vulnerable.
However, some of the large European insurers such as Allianz and Munich Re, have seen their financial strength eroded.
Legal & General group finance director Andrew Palmer said: "Individual firms, the weaker siblings if you like, may have problems with the FTSE at these levels."
