LONDON, Oct. 20 (Reuters)—European insurers can withstand morelosses on their Greek sovereign debt, as well as potential defaultsby Ireland and Portugal, credit rating agency Moody's said onThursday.

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

“We believe that a theoretical default scenario in the case ofPortugal and Ireland, or a further debt writedown or restructuringin the case of Greece, would not have a direct material impact onrated European insurers' financial positions,” said Moody's analystBenjamin Serra.

European insurers including Allianz , Axa and Generali wrotedown the value of their Greek sovereign bonds by between 40 and 50percent in August, and are expected to unveil further impairmentsalongside their third- quarter results over the next twoweeks.

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

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

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

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

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