Standard & Poor’s Ratings Services has issued a report which “discusses why it thinks the European insurance industry seems nervous as it enters the second half of 2011.” The report – “European Insurance Credit Trends: Despite Strong Balance Sheets, Insurers Are Uneasy About The Future” – indicates that, although “insurers have largely restored their balance sheets from their low point in the first quarter of 2009,” they are nonetheless worried about the future.
S&P said it believes there are “negative implications of economic trends on the industry,” which “are compounded, in our view, by the potential impact of industry wide projects such as the implementation of Solvency II supervision and the International Accounting Standards Board’s Phase 2 insurance accounting project.”
S&P also noted that later this year, “the Group of Twenty’s Financial Stability Board will announce which entities it has designated as systemically important financial institutions on a global basis (G-SIFIs). While we expect that most G-SIFIs will be banks, some insurers may also be in the frame.”
The combined impact of those initiatives will, according to S&P, have an “adverse effect on future non-life operating performance if economic activity does not continue on its modest upward path. This is also true of investment earnings, which are making a much smaller contribution to insurers’ overall performance at present than they did in the first half of the decade.”