“With central banks across Asia-Pacific looking to adjust interest rates at different times, relative value of assets and returns, as well as hedging costs, could move,” said Craig Bennett, credit analyst at S&P Global Ratings
Melbourne:
International rating agency Standard & Poor’s expects its ratings of Asia-Pacific insurers to remain stable though economic conditions and underlying changes are pressuring their earnings.
“With central banks across Asia-Pacific looking to adjust interest rates at different times, relative value of assets and returns, as well as hedging costs, could move,” said Craig Bennett, credit analyst at S&P Global Ratings.
This is according to a chartbook-style commentary we published today, titled, “Asia-Pacific Insurance Sector Trends: Returning To Fundamentals As Undercurrents Unfold.”
Meanwhile, slowing economic growth can also impact policy retention, new premiums, as well as the credit quality of investments.
“We believe insurers will return to fundamentals by focusing on underwriting and prudent risk selection to navigate headwinds,” Bennett added.
Key takeaways
Credit trends in the Asia-Pacific insurance sector remain steady, though prospects vary across regions. Of the Asia-Pacific insurers we rate, 98% have a stable outlook
-With major central banks adjusting monetary policies, capital market volatility may rise. Insurers in Japan and Taiwan face risks of asset and foreign exchange movements, potentially affecting capital buffers,
-As economic growth slows, insurers will focus on investment risk oversight. Credit stresses, particularly in real estate and alternative investments, may lead insurers to reassess the risk-return balances and become more selective,
– As discussions on climate change and sustainable finance heat up, insurers face dual risks in underwriting and investments. Extreme weather events lead to increased claims, impacting earnings for P/C re/insurers, while higher reinsurance costs and growing catastrophe budgets further erode profits.