S&P: Global Multiline Insurers’ Credit Quality to Stay Strong in 2015

October 21, 2014

Global multiline insurers (GMI) continue to show strong credit quality, according to Standard & Poor’s Ratings Services.

S&P provided an overview of the GMI sector in an article titled “Global Multiline Insurers’ Diversity and Capitalization Will Remain Key Rating Strengths in 2015.”

S&P says the capitalization of the 14 GMIs it rates will strengthen further in 2014 and 2015.

“Earnings in the sector have stayed solid over the past five years, despite the extended period of low interest rates, particularly in Europe,” said Standard & Poor’s credit analyst Volker Kudszus. “We believe this is largely thanks to the GMIs’ product and investment strategies, diverse income sources, and wide geographic reach. A low level of non-life insurance claims has also benefited retained earnings.”

Our average rating in the sector is ‘AA-‘, which is stronger than the average for all insurers S&P rates.

Many GMIs display very strong capital adequacy, according to S&P’s risk-based model. Over the period 2008-2013, the ratings agency observed an average annual 6 percent increase of total adjusted capital (TAC), which is its measure of an insurance company’s available capital.

S&P expects TAC to increase further by 6 percent to 7 percent per year on average in 2014 and 2015. At the same time, we expect the GMIs’ risk-based capital requirements to rise by about 3 percent annually.

“We believe we will see the GMIs continuing to build their earnings and capital as long as they maintain their current business and financial profiles,” said Kudszus. “We therefore expect most of our credit ratings to stay robust, in line with our current findings and because most GMI ratings carry stable outlooks.”

Source: Standard & Poor’s Ratings Services

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