Jan 14 - Standard & Poor's Ratings Services believes the credit quality of global multiline
insurers (GMIs) it rates is still generally sound, according to an industry report card "Global
Multiline Insurers' Credit Quality Remains Strong, But Many Hurdles Lie Ahead," published today
This is despite a downward trend we have observed over the past four years
amid ongoing economic and industry challenges in Europe and the U.S., high
natural catastrophe claims, and volatile equity markets. According to our
criteria, the GMIs still show sound credit characteristics that compare
favorably with those of large corporate or financial institutions.
Our ratings in the sector therefore remain in the lower 'AA' to upper 'A'
range. Several carry negative outlooks, however, as we anticipate mounting
pressure on the GMIs over 2013 and 2014. In particular, increasing credit risk
in weakened economies, low interest rates, and difficult operating conditions
have been eroding insurers' profits, threatening the adequacy of their capital
bases. In our view, the preservation of capital has therefore become the top
priority for many GMIs.
We think the GMIs' global geographic and product diversification affords them
an advantage over less diversified insurers and positions them well to
implement their strategic plans. However, we expect the challenges of low
interest rates, increasing credit risk in investment portfolios, persisting
equity market volatility, and uncertainties relating to the European sovereign
debt crisis to remain the main threats to our credit ratings on GMIs.