2007 to be good year for European insurers, says S&P’s

Year 2007 promises to be a good year for the European insurance sector, according to a report by Standard & Poor’s. Nevertheless, the primary and reinsurance markets may be beyond their pricing peak, according to the report, entitled “European Insurance: 2006 In Review, 2007 In Anticipation.””The absence of large losses, peak-of-the-cycle underwriting profits, and solid investment performance have contributed to the good results for the non-life sector,” the report notes. “An increase in interest rates has eased the pressure over contract guarantees for the life market.”In terms of ratings, 79% of insurance ratings within the European sector were assigned a stable outlook, 16% a positive outlook, and just 5% a negative outlook or CreditWatch status.”Factors that might upset this stable environment include poor execution of acquisitions and investment market volatility,” the report notes. “Equally, further positive outlook revisions could occur if insurers are able to demonstrate that favorable earnings trends are sustainable through the cycle.” Commenting on the report, Standard & Poor’s credit analyst Simon Marshall said: “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.”