Although the insurance industry has enjoyed strong business conditions over the last few years, the worsening economic outlook will likely pose considerable challenges in the year ahead.

What began as a problem in the market for securitized U.S. subprime mortgages rapidly spread to other markets and ricocheted around the world as investment dried up for a wide range of instruments.

After rising interest rates and a decline in U.S. housing prices drove increased defaults among subprime borrowers, investors rapidly lost their appetite for securities based on subprime mortgages.