Some global insurance brokers could perform well in a sluggish economy with rapid inflation, an analyst said.

FBR Capital Markets analyst Bijan Moazami wrote in a research note that "disciplined underwriters" and global brokers such as Marsh & McLennan Co. and Aon Corp. could perform "reasonably well" during stagflation, a term economists use to describe slow growth with rapid inflation.

During the last period of stagflation, in 1973 and 1974, property and casualty insurance underwriters reported deep declines in their profits, the analyst said. The companies also used up a lot of the surplus capital that insurers keep in case of higher-than-expected future claims.

Between the end of 1972 and the end of 1974, pretax operating income in the sector decreased to $959 million from $3.72 billion, the analyst said. Surpluses fell to $16.3 billion from $23.8 billion, he said.

Slow economic growth hurts insurers by depressing demand for insurance, the analyst said. And when fewer workers are on the payroll, insurers collect less cash from workers' compensation premiums.

Inflation hurts insurers because they typically underwrite based on the current value of the dollar. Later, when customers file claims, the dollar is worth less. Insurers must pay out more to replace damaged goods or cover healthcare costs.

In such an economy, insurance underwriters' profits likely would shrink, and their share prices would fall, the analyst said.

However, he said, some insurers would do better than others.

"Companies with strong balance sheets, a culture of underwriting discipline and a proclivity for acquisitions could perform relatively well," he said. The note did not identify any companies that would fall into that category. And Moazami said investors still would be wise to avoid insurance underwriters amid economic stagflation.

Yet Moazami said that global brokers like Marsh & McLennan and Aon would do relatively well in those circumstances. It's not possible to draw comparisons from the 1970s, because the stocks didn't exist at the time, he said.

But after catastrophes such as Japan's earthquake, tsunami and nuclear disasters, "the world is perceived as riskier than it used to be, which spurs demand for insurance brokerage services," he said. Brokers also are benefiting from their growing exposure to emerging markets, he said.

"At the minimum, we believe that stagflation would be somewhat neutral for insurance brokers," Moazami concluded.

Shares of Marsh & McLennan rose 13 cents to close at $29.42 Wednesday. Shares of Aon gained 30 cents to close at $52.51.