Moody’s Investors Service has maintained its negative outlook on the European insurance industry as solvency and profitability continues to be pressured by coronavirus.
Moody’s also changed the outlook on the UK life and Italian life insurance sectors to negative from stable, reflecting the rating agency’s view that the coronavirus outbreak will pressure capitalisation and top line growth.
“Volatility in financial markets has reduced solvency levels by 20 percentage points on average so far, and downside risks are high,” said Benjamin Serra, a Senior Vice President at Moody’s.
“Interest rates will stay lower for longer, weighing on the solvency and profits of both life and P&C insurers.”
Analysts at Moody’s say market volatility will also hinder insurers’ efforts to change their product mix towards unit-linked products.
Additionally, delayed premiums payments and slower economic activity will reduce inflows for insurers in the short term, particularly those with a mainly corporate customer base, however Moody’s does not anticipate liquidity pressures for insurers.
Moody’s expects coronavirus-related claims, in both life and non-life segments, to remain manageable but insurers face the risk that governments will exert pressure to make ex gratia payments to their clients or to make some other form of financial contribution to the resolution of the crisis.
