(The following statement was released by the rating agency)
Feb 13 - Fitch Ratings says in a new report that its rating outlook for the Swiss insurance sector remains stable. The agency considers the Swiss primary insurance industry is well prepared to meet the challenges facing it.
The Swiss life insurance market is threatened by the low interest rates persisting in Switzerland, in combination with the high proportion of sales represented by guaranteed products. Nevertheless, these threats are outweighed by the stability of the economy in Switzerland, the high predictability of financial and economic developments, and the fact that for group life business, guarantees are adjusted on a regular basis.
"The non-life sector in Switzerland remains highly profitable, particularly on the technical side, and constitutes the backbone of the earnings stability of the Swiss primary insurance industry," says Stephan Kalb, Senior Director in Fitch's insurance team. "Market participants are highly disciplined and are successfully compensating for current low investment yields by focusing on their underwriting performance. Fitch expects the non-life sector to maintain its high level of profitability in 2013."
Competition in the Swiss insurance industry remains high, as Switzerland is a mature market with significantly higher insurance penetration than most other European countries. Potential for top-line growth is therefore limited.
The key triggers that could result in a negative rating outlook are a worsening in the eurozone crisis or weakening in underwriting discipline of market participants. The stable rating outlook assumes low economic growth in Switzerland for 2013 and 2014.
Fitch does not expect factors that could lead to a significant number of upgrades to emerge over the next 12-18 months. The biggest constraint remains the challenges regarding achievable investment returns in Switzerland, which are unlikely to disappear in the short term.
The report, entitled '2013 Outlook: Swiss Insurance Market', is available at www.fitchratings.com or by clicking on the link below.
Link to Fitch Ratings' Report: 2013 Outlook: Swiss Insurance Market