SINGAPORE: The industry risks in the Asian insurance markets are divergent, from low level to high level of risks among countries in the region, depending on market maturity, regulatory development and wider economic conditions, according to a report by Standard & Poor's Ratings Services released yesterday.
Although the outlook for insurance ratings across the region generally is stable, challenges such as softening in the insurance cycle and a volatile investment environment continue to pressure insurers' profitability.
“After strengthening since 2001, pricing in Asia Pacific's non-life insurance markets has passed the cyclical peak and is weakening. Underwriting profitability across the region is expected to turn south in 2004,” said Standard & Poor's credit analyst Ian Thompson, managing director of the Financial Services Ratings Group.
The region’s life insurance sector generally has stabilised, as a result of better recent profitability, attributable to improved investment performance and cost control in the past year, but remains plagued by pressures associated with the prevailing low interest rate environment and volatile equity market.
Operating performance for much of the industry is expected to improve in the near term, reflecting the benefit of efficiencies such as reduced crediting rates and improved expense structures, as well as strengthened economic conditions and solid growth dynamics.
“However, the problem of negative interest spreads on high rate guaranteed products is narrowing only slowly, and remains a significant problem in countries like China, Taiwan and Japan,” said Thompson. – Reuters
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