Insurers Face Earnings Growth Challenges in Varying Global Economy: S&P

When it comes to finding earnings growth in 2015, the challenge facing the global insurance industry will be uneven economic conditions in many parts of the world, according to a report released by Standard & Poor’s Ratings Services.

Entitled “Pursuing Global Insurance Profitability Amid Tempered Economic Growth,” the report said the foremost obstacle insurers will confront is the widely varying prospects for economic growth from region to region.

Making profitability even more difficult are extraordinarily low interest rates (negative, in some cases), which will likely stay lower for longer, particularly in the eurozone. In addition, insurers in many regions must cope with tighter capital standards, weak pricing due to excess capital, or stricter regulatory controls on product design and distribution in some markets.

Earnings growth overall should rise, but developing market insurers (13 percent to 20 percent growth) are likely to outrun those in more mature markets (about 5 percent).

“The relationship between earnings and ratings isn’t simple: Rising earnings growth alone doesn’t necessarily lead to higher ratings, but weak earnings generally weigh on ratings,” said Standard & Poor’s credit analyst Patricia Kwan.

Source: Standard & Poor’s

Topics Carriers Profit Loss