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Asia-Pacific Insurer remain firm despite shifting economic conditions: S&P

The insurers' positive market positions and high levels of controlled distribution account for their strong business risk profiles.

September 04, 2013 10:47 IST | India Infoline News Service
Although economic conditions in Asia-Pacific are shifting, insurer credit profiles in the region remain firm, said Standard & Poor's Ratings Services in a report published today.

The report, titled "Asia-Pacific Insurers Are On Firm Footing As Economic Conditions Shift," noted that Standard & Poor's expects most of its ratings on insurers in the region to be stable for the next 12 to 18 months.

"We see limited rating pressure on the region's insurers because of their strong business risk profiles, financial flexibility, and liquidity," said Standard & Poor's credit analyst Patricia Kwan. "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 our ratings on most Asia-Pacific insurers include strong business risk profiles and the slightly favorable scores we assign 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 nonlife premium rates to stay largely flat in the near term," Ms. 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 U.S. 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 noncatastrophe reinsurance market will stay competitive.

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