Unipol Gruppo FinanziarioSpA's exposure to the Italian banking sector has made it the worst-performingstock in a sample of top European insurers and reinsurers since the U.K.'s voteto leave the EU roiled markets.

The nonlife insurer shed 21.4% by July 13 since the British referendumJune 23, the result of which only heightenedfears of an upcoming vote on constitutional reform in Italy, which couldpotentially topple the center-left government of Matteo Renzi.

Italian bank and insurance stocks like Unipol and — the sixth-worst performer,with a 15.32% loss — have suffered more than U.K.-listed companies, which face beingcut out of the EU's Single Market.

While the post-Brexit prospect of a prolongation of ultra-lowinterest rates dims the outlook for life insurers' investments, nonlife insurershave benefit from being able to rely more on underwriting income. But Unipol's exposureto Italy and troubles in its banking unit mean it has suffered regardless.

Concerns over the health of Unipol Banca's loan book, and a spateof bad news from elsewhere in the banking sector, have rattled investors, one Milan-basedanalyst said. Unipol Banca SpA'snonperforming loans came in at €3.9 billion at the end of the first quarter, almosthalf loans to customers of €8.7 billion. In April, Fitch said the "extremely weak" credit quality of itsbanking operations was likely to affect Unipol's capital and profitability.

Unipol Banca, which had a coverage ratio of 44.6% at the endof the first quarter, is aiming to cut NPLs to €3.3 billion by 2018. Otherwise,Unipol Group should easily be able to bail out its bank if losses mount, the Milan-basedanalyst said, adding however that this could cost as much as hundreds of millionsof euros and endanger the group's plan to pay €400 million in dividends over thenext three years.

Other analysts have suggested Unipol could sell the bank.

A second analyst, who also spoke on condition of anonymity becausehe is not allowed to talk to journalists, said the group should be able to managethe NPL problem within its bank and that cutting the dividend would be an "absoluteworst-case scenario."

Unipol's reliance on Italian business — it lacks the Europeandiversification of peers like Generali — makes it an especially vulnerable stockto Italy's political crisis, Martina von Terzi, an analyst with HVB-UniCredit, said.Insurance companies have also been caught in the selling of Italian banks that cameas the nation's government floated a plan to pump tens of billions of euros intothe sector, meeting immediate European resistance. EU officials have reminded Italythat the bloc's law requires bondholders to be bailed in before state aid to banksis permitted.

"Banks and insurance debt indices are strongly correlatedand thus it's not surprising that the insurance sector in Italy reacted stronglyto uncertainty about capital position and bail-in discussions," she wrote inan email.

Reinsurers, with large non-European exposures, have best withstoodthe market turbulence. LancashireHoldings Ltd. and HiscoxLtd., which underwrite risk through Lloyd's of London, saw increasesin their share prices, albeit in the context of a declining pound sterling.

Even if the U.K. leaves the EU entirely, the position of thecountry's large reinsurance industry would be relatively secure, since reinsurersare not dependent on Single Market access to provide reinsurance services to Europeanclients, Aon Benfield said in a July note.

A cheaper pound would also decrease the industry's cost basein foreign currency terms, analysts pointed out.

Unipol Gruppo Finanziario SpA is the parent company of .