Life insurers in Australia, New Zealand to face tough weather

Melbourne: In its latest report on the Australian and New Zealand life insurance industry, Standard & Poor’s (S&P) rating services has warned about the weak outlook.

“The life insurance industry continues to face volatile investment markets and an uncertain economic and industry environment,” says Kate Thomson, credit analyst. “We expect that the industry in 2003 will face the same difficulties as it did last year, with local and offshore pressures likely to impact ratings.”

In 2002, the life industry experienced significant declines in global equity market values, which eroded capitalisation, reduced fee income as funds under management contracted, and lowered product revenue as consumers opted not to purchase additional investment products, according to the life insurance digest.

“A large number of insurance companies’ ratings were lowered in 2002 (including AMP, Tower, and Royal & Sun Alliance), and several life ratings remain on CreditWatch highlighting ongoing difficulties faced by the industry in 2003,” adds Thomson.