LONDON, Oct. 20 (Reuters)—European insurers can withstand more losses on their Greek sovereign debt, as well as potential defaults by Ireland and Portugal, credit rating agency Moody's said on Thursday.

Most European insurers have low exposure to the economies and sovereign debt of the eurozone's indebted peripheral nations, and would suffer only a “minimal impact” if their creditworthiness deteriorated further, Moody's said in a report.

“We believe that a theoretical default scenario in the case of Portugal and Ireland, or a further debt writedown or restructuring in the case of Greece, would not have a direct material impact on rated European insurers' financial positions,” said Moody's analyst Benjamin Serra.

European insurers including Allianz , Axa and Generali wrote down the value of their Greek sovereign bonds by between 40 and 50 percent in August, and are expected to unveil further impairments alongside their third- quarter results over the next two weeks.

Analysts have said worries over the insurance sector's exposure to the sovereign debt crisis centre on its substantial holdings of bonds issued by larger debtor nations Italy and Spain.

European insurance shares have lost about a quarter of their value in the last eight months, partly reflecting concerns the sector could be forced to raise fresh capital to offset losses on their government debt portfolios.

Moody's confirmed that insurers would be “vulnerable” in the event of significant credit deterioration in Italy and Spain, weighed by their greater exposure to those countries as well as the financial market turmoil that such an event would trigger.

European Union governments are due to meet on Sunday to agree a solution to the eurozone crisis, involving a recapitalisation of the banking system and a mechanism for financing critically-indebted members of the single currency area.

Moody's rival Fitch last week warned it might downgrade Italian insurers, citing linkages between their credit rating and that of the Italian state, which has been lowered by a total of three rating agencies in the past month.

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