Weaker economic conditions, including a possible double-dip recession, could cause investment losses in bond, direct mortgage and equity holdings, leading to weaker profitability for insurers, ALIRT contends. Additionally, further economic struggles could also increase unemployment, which could impact group medical health sales for P&C and health insurers, ALIRT adds.

ALIRT also says a weaker economy could have “an especially adverse impact on P&C insurers if it defers a likely needed turn in commercial-lines pricing, as supply for product would continue to exceed demand and insurance buyers balk at price increases.”

The firm notes that lower equity markets could result in direct investment losses for insurers, and cause potential buyers to defer purchases.

“In short,” ALIRT concludes, “more than three years after the onset of the financial crisis, the macroeconomic conditions that directly impact insurers both on a revenue generation and earnings basis appear to be once again in great flux. The downgrade of the leading economic power's sovereign debt only exacerbates current global financial anxiety.”

Meanwhile, Senate Banking, Housing, and Urban Affairs Committee Chairman Tim Johnson (D-SD) released a statement calling S&P's downgrade “irresponsible.”

“In the minds of serious, reasonable, and informed individuals there is no doubt that the U.S. will meet its debt obligations and we are seeing even more proof of that today,” he says. “As the financial markets stumble, investors continue to regard Treasury debt as a safe haven in times of economic uncertainty.”

He states, “I am deeply disappointed in S&P's decision to enter into the game of political punditry.”