In the year when dozens of U.S. banks and financial institutions failed, insurance companies seem to ride the storm well.

Providers particularly property/casualty (P/C) insurers X handled economic troubles better than insurers who branched out into other financial services sectors. Industry experts attribute this to their clear-cut management techniques and focus on their core business.

While insurers saw their collective policyholder surplus drop in 2008 amid the turbulence in the world’s equities markets, most were still able to conduct business as usual, a feat amid the ongoing financial crisis.

A mix of industry analysts, regulators and media representatives, agreed that the insurance industry is not facing a credit or liquidity crisis. Unlike banks and other financial entities, which have been struggling, insurance companies, in general, do not borrow to make investments or pay claims. So even when some investments perform poorly, the effect is not magnified as it is than when investments are put in stocks or loan capital.

Michael S. Pritula, director of McKinsey & Company noted that insurance ”is a relative island of calm” as compared to the banking and  securities industries, which saw widespread merger activity in 2008 and even some bankruptcies.

“P/C insurers have shown themselves to be among the best risk managers in financial services by sticking to a basic business plan, avoiding recklessness and standing by the risks they write,” said Sam Friedman, editor-in-chief of National Underwriter.

“Those that kept their business strategies simpler fared better,” added Vincent J. Dowling, Jr., managing partner, Dowling & Company, noting that the insurers who were most adversely affected by the 2008 economic downturn were companies that had moved away from their core business and into other, more risky ventures.

Friedman also noted that it was problems originating in a non-insurance entity within AIG’s holding company, not with its insurance business, which prompted the federal cash infusion into AIG.

There are, however, other insurers out there who may also need federal assistance.

“Life (insurers) felt the pinch more than the property/casualty sector,” said Connecticut Insurance Commissioner Thomas Sullivan referring to the number of life insurance companies that have sought to qualify for the federal Troubled Asset Relief Program (TARP) monies through the acquisition of federally regulated thrifts.

Despite the relative calm of the insurance market, there is still lingering talk about  the future of insurance regulation, and to what extent the federal government will attempt to assert itself in a field that has traditionally been handled exclusively at the state level. However, a consensus emerged that the issue may not rank as a high priority amid all of the other pressing matters pending in Congress.