European insurers and reinsurers have survived the financial storm but poor investment returns and Solvency II will hound earnings growth for years to come, according to Standard & Poor’s.
In a industry report issued today by S&P, the rating agency says that economic and market pressers will continue to weigh on both European life/health and property/casualty insurers.
Among the reasons for the poor outlook is the stagnant European economy, which is leading to hampered investment returns and difficulty for carriers to increase prices.
“Life insurers’ new business levels are depressed in most European countries this year and we do no anticipate a rapid recovery,” the report says. It adds that non life carriers will see increased claims frequency as the recession continues.
Additionally, S&P says that uncertainty over capital rules and the adoption of Solvency II will continue to hamper growth for insurers as they attempt to adjust to the new environment.
Insurers are particularly worried about new rules proposed by the the Committee of European Insurance and Occupational Pensions Supervisors which increased capital levels.
“The perceived view of insurers is that these requirements represent a knee-jerk response to the financial turmoil of the past two years,” the S&P report added.
Of the 160 rated insurance groups in Europe, S&P says that it has downgraded 24 and upgraded only nine this year. Additionally, 33 Euro insurers have a negative outlook by the rating agency.
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