The European non-life insurance sector has enjoyed very good results in 2006, and 2007 is expected to be another good year for the sector, according to a Standard & Poor's report released today.
Nonetheless, the primary and reinsurance non-life markets may be beyond their pricing peak, S&P said.
The absence of large losses, peak-of-the-cycle underwriting profits and solid investment performance has contributed to the good results for the non-life sector.
"The ratings within the sector support this buoyant view, with 79 percent of insurance ratings assigned a stable outlook or developing CreditWatch listing, 16 percent a positive outlook or CreditWatch listing, and just 5 percent a negative outlook or CreditWatch status," said Standard & Poor's credit analyst Simon Marshall in a statement.
Factors that might upset this stable environment include poor execution of acquisitions and investment market volatility. Equally, further positive outlook revisions could occur if insurers are able to demonstrate that favorable earnings trends are sustainable through the cycle.
"While there is much to be positive about in the European insurance sector as we look forward to 2007, it should also be remembered that the quiet 2006 U.S. hurricane season leaves unanswered crucial questions that emerged in the aftermath of the 2005 storm losses, as well as potentially damaging the pricing environment going forward," Mr. Marshall said.
The report said that with enterprise risk management (ERM) analysis firmly embedded in the S&P ratings, 82 percent of European insurers have been rated as adequate, while only 4 percent have been seen as weak in terms of ERM numbers.
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