Standard & Poor's analysts said the WorldCom debacle is symptomatic of an ongoing trend that spells downgrades for US insurance companies.
"The WorldCom exposure is part of a wider problem," said Mr Jack Reichman, director. "There's potential for death by a thousand cuts."
US insurers held $7.3 billion in WorldCom investments at year-end 2001, by S&P's estimates.
"Although no single insurer has enough exposure to warrant a rating change, the accounting sins of this MCI Communications Corp affiliate are merely the latest salvo in a barrage of scandals and high-profile bankruptcies to hit financial markets since late 2001," analysts said.
"Although an individual credit weakening does not create a problem in itself, the insurance industry is vulnerable to the cumulative impact of a general credit market meltdown," said Jay Dhru, managing director.
So far, life insurers have shown the greatest exposure to losses on investments, but other insurance sectors are not immune, said Bob Partridge, managing director.
"Property/casualty companies build investment returns into their pricing," he explained, "so these developments have muddied the waters for them too."
Some property/casualty companies are also increasingly vulnerable in their coverage of directors' and officers' liability, it said.