NEW YORK ( TheStreet) - Inflation remains a primary concern for insurers' bond-heavy investment books and it could be a long-term threat to profitability unless managed correctly, industry professionals say.

"Generally, insurance companies benefit from slow rising prices, but it would be a bad thing if we had raging inflation," said Anne Walsh, assistant chief investment officer at Guggenheim Global Investments during Bloomberg's Insurance Portfolio Strategies Conference Wednesday.

Sarah Street, executive-vice president at XL Group ( XL) said inflation is not a concern for insurance companies' short term fixed-income holdings. However, longer-term inflation could push come companies to reach for yield. "I don't think when I look at the market today that there are good risk adjustment return. Back in April 2009, that was the time to take the risk."

Walsh added that insurers should be selective in their investment decisions and not attempt to outwit the credit markets.

"There is still opportunity out there. We are not falling into the bond bubble thinking," Walsh said. "There are sectors of value, to the extent that insurance companies should participate in those sectors."

Walsh added that "frothiness" has not yet returned to the marketplace, but insurers should keep a particular eye on increasing risks in asset backed securities, municipal bonds and mortgage back securities.

"The risk cycle seems to be getting shorter every time. It is time to be thoughtful and careful," she said.

Cecilia Reyes, CIO of Zurich Financial Services cautioned that the first signs of long-term inflation are already showing up in the emerging markets.

"We have still yet to see commodity, oil and energy prices in the beltway markets impacted. It is not as much a concern for beltway countries as it is for the emerging market," Reyes said.

--Written by Maria Woehr in New York.

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