Insurers strong despite low-rate pressure: S&P

Any suggestion that interest rates were starting to normalize is a false dawn, but insurers remain strong, says S&P Global Ratings, which maintains a “stable” outlook on the sector.

Ratings on European insurers should be stable in 2020 and largely resilient to the low rate pressures for some time to come, said S&P.

As central banks have reversed course, insurers face low interest rates, by now a familiar foe, for the foreseeable future, says S&P. The global economy appears less resilient to financial shock than it was 10 years ago. The risk of recession in the U.S. has risen to an estimated 30-35 percent, from 15-20 percent this time last year.

However, S&P said that credit fundamentals for rated European insurers remain strong and support its stable outlook on the sector. In particular, its ratings are still supported by insurers' robust capital positions.

For those insurers that can manage the low-rate pressure, the ongoing transition of the global economy presents a tremendous opportunity for the industry to demonstrate its value, said S&P. “s the composition of the economy shifts, the nature of risk and the types of protection demanded from corporations and individuals will change. Insurers must rethink their products to evolve with the market, said S&P.

It added: “As investors and underwriters, they also have a role in supporting the shift toward a more environmentally friendly and sustainable economy.”

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