The property/casualty insurance industry got another thumbs-down vote last week as Moody’s Investor Services downgraded its outlook for the industry to negative from stable.

Troubled investment portfolios and a weak market outlook contributed to the industry’s downgrade, although the Moody’s announcement noted that insurers are adequately capitalized to make good on their policy commitments.

In general, the industry is relatively strong compared to other financial institutions, thanks in large part to smaller exposures to troubled asset classes. Property/casualty insurers have gotten a slew of negative news in the past couple weeks, including a report from the Insurance Services Office Inc. and the Property Casualty Insurers Association of America that stated the industry’s profits fell 96.2 percent in 2008 thanks to catastrophe losses and the ongoing financial crisis.

Net losses on underwriting were $21.2 billion, compared with $19.3 billion in the prior year. Net investment gains fell by about 51 percent to $31.4 billion. Standard & Poor’s contributed to the overall gloom by reaffirming its negative outlook on the industry a day before Moody’s made its announcement Thursday. S&P had also recently released a report that discussed the challenges property/casualty insurers will have to face in the next decade.

The next few years in particular are going to be difficult for the industry, according to S&P credit analyst Damien Magarelli, which will stunt these companies’ growth in the near future. Chiefly, the financial crisis will contribute to the slowdown because policyholders may reduce coverage to lower their insurance premiums. The industry should focus on a few major trends, including population density transfers to different locations within the U.S. and globally, continued growth in emerging markets, and increased government regulations, according to a summary of the report.