In an industry report card titled “Global Multiline Insurers’ Robust Market Positions And Improving Capital Translate Into Stable Ratings,” published today, Standard & Poor’s Ratings Services says that, overall, it considers global multiline insurers (GMIs) to still display better credit quality than other insurance groups or companies.
We believe this stems from their wide geographic and product diversification and generally very strong market positions, which support earnings. In addition, over the past 18 months the GMIs’ capital positions continued to improve, and remain a rating strength. Our ratings on GMIs are still stronger than the average for all insurers we rate, and only three outlooks are negative compared with four at the end of last year. The negative outlooks reflect sovereign or group level issues rather than concerns over those GMIs’ insurance operations.
Low interest rates continue to dampen GMIs’ profitability, however, particularly from life insurance business. Our economists predict a slight increase in long-term interest rates between 2013 and 2015 in the U.S., U.K.,
Germany, and Japan, which might ease the pressure on earnings. On the other hand, we see mixed trends in the growth of assets under management and new-business margins, depending on the region and product line.
Looking at non-life insurance, we see rate increases in selected product lines in several regions. In general, GMIs tend to be ahead in this segment, thanks to leading positions in several significant markets, but we cannot rule out setbacks.
Eight of the nine insurance groups the Financial Stability Board (FSB) has recently designated global systemically important insurers (G-SIIs) are GMIs we rate. The implications for G-SIIs are still unclear. But we believe that from 2019, potentially higher capitalization requirements and stricter supervision could influence our ratings on insurance groups classified as G-SIIs.
