) -- Violent interest swings are the biggest threat to insurers profitability in 2011, said Mark Puccia, managing director at Standard & Poor's during a conference Monday.

"If insurance companies could be praying to the interest rates gods they would pray for a four to five percent increase gradually," said Puccia. "Unfortunately, that won't likely be the case."

Puccia said that if there were a spike in rates -- from anywhere from 200 to 300 basis points -- it would squeeze insurance pricing and many insurers would need to approach policyholders to exchange existing contracts for ones with higher rates. That, in turn, could cause a spike in policy lapses, Puccia added.

2011 Insurance Company Ratings >>

However, if interest rates decline further then universal life, disability and all annuity type products could experience "spread compression," causing insurers to experience significant losses on their investment portfolios.

Insurers with high exposure to interest rate risk include companies such as

American International Group

(AIG) - Get Report



(GNW) - Get Report


Jackson National


Lincoln National

(LNC) - Get Report



(MFC) - Get Report

, and

Protective Life


, according to Robert Hafner, director at Standard & Poor's.

Hafner added that a low interest rate environment would impact net income from some insurers by four to five percent in 2011.

--Written by Maria Woehr in New York.

To contact the writer of this article, click here:

Maria Woehr


To follow the writer on Twitter, go to


To submit a news tip, send an email to: