Global life insurance sector stable and robust: Moody’s

As Bermuda’s life reinsurance sector continues to grow, players in this sector should look forward to dealing with clients enjoying stable conditions, according to Moody’s.

The rating agency said the outlook for the global life insurance sector is stable, reflecting a favorable economic cycle and strong capital levels, Moody's Investors Service said in a report published on December 5.

The report, called "Life Insurance -- Global 2019 Outlook: Stable - reflecting favorable economic cycle and strong capital" suggested that global life insurers have adapted to persistent low interest rates better than expected by exchanging sales of interest-sensitive products for fee-based retirement, savings and health products.

"Rising interest rates in some regions, such as the US and Canada, have been positive credit drivers," said Manoj Jethani, a Moody's vice president.

"However, there is marginal re-risking of investment portfolios, with a gradual move towards lower quality and less liquid assets, such as private credit and alternatives."

Overall, the balance sheets of global life insurance companies are healthy and capital levels are expected to remain robust in 2019, although some challenges lie ahead. Specifically, RBC ratios are expected to decline in the US due to the impact of tax reform, although this should not affect the credit profile or ratings in the region.

UK and Japanese capitalization is expected to remain solid, although any financial market volatility in the UK as a result of Brexit remains an area of focus. In China, the capitalization of life insurers remain solid, while the refinement of C-ROSS will be beneficial for the insurance industry. More negatively, the German life market remains under particular pressure, and some insurers face solvency risks if interest rates stay low.