Shares of Bermuda-registered insurance companies slumped on Friday after Morgan Stanley analysts downgraded their rating on the world's leading insurer, American International Group, and on the whole property and liability insurance sector.

AIG slumped 7.88 percent or $4.80 to $56.13 on the New York Stock Exchange. The stock is down 45 percent from split-adjusted highs topping $103 in December, 2000.

Bermuda insurance stocks followed the fall, with ACE down 1.84 percent, IPC Holdings down 1.27 percent, Montpelier Re down 2.23 percent, PartnerRe down 5.8 percent, Platinum Re down 2.12 percent, White Mountains down 2.48 percent and XL down 3.34 percent. The Standard & Poor's Insurance index was down four percent overall.

Analyst Alice Schroeder cut her rating on AIG to "equal weight" from "overweight", saying recent premium rate hikes - spurred on by the destruction of the World Trade Center - had peaked, and the company was sensitive to the weak economy, which showed no signs of recovering by mid-2003.

AIG was one of the first insurers to set up an operation in Bermuda and is a shareholder in several other local insurance companies.

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