Asia-Pacific insurer credit profiles remain firm: S&P

In its report “Asia-Pacific Insurers Are on Firm Footing as Economic Conditions Shift” published yesterday, S&P expects most of its ratings on insurers in the region to be stable for the next 12-18 months.
“We see limited rating pressure on the region’s insurers because of their strong business risk profiles, financial flexibility and liquidity,” said Patricia Kwan, an S&P credit analyst.
“However, stability doesn’t necessarily imply improvement. Indeed, we think a positive trend in our ratings on Asia-Pacific insurers is remote because of the economic uncertainty that may dampen insurers’ operating earnings.”
The key factors supporting S&P’s ratings on most Asia-Pacific insurers include strong business risk profiles and the slightly favourable scores it assigns for insurance-industry and country risk assessment.
The insurers’ positive market positions, as measured by market share, and high levels of controlled distribution account for their strong business risk profiles.
Asia-Pacific insurers, however, have modest financial risk profiles, largely attributed to the insurers’ less robust capital and earnings, generally due to their small capital size, and their significant exposure to high-risk assets.
“We expect non-life premium rates to stay largely flat in the near term,” Kwan said.
“Growth for life insurers in the region moderated because of the slowing economies, but their prospects remain stronger than insurers operating in the US and Europe.
“We expect the property-catastrophe reinsurance market to remain firm in Asia-Pacific, although it has moved to slightly softer pricing after a spike in premium rates since the 2011 catastrophes. We believe the non-catastrophe reinsurance market will stay competitive.”