European insurance industry ratings stabilizing

The financial ratings of European insurers has continued to stabilize over 2004, says a report released by rating agency Standard & Poor’s (S&P). "Only five of the 20 groups covered in this report continue with a negative outlook, compared with just five stable outlooks back in May 2003," comments S&P credit analyst Hans Wright.The financial returns of companies over the course of the first three quarters of this year testify to the improved rating stability of the European insurance marketplace, the report observes. "In general, these results have been achieved against stabilized equity markets, rising interest rates, hard pricing, and benign claims experience in EuropeSuch favorable conditions make it more difficult to identify genuine improvement in underlying risk management," says Wright.But, after the tough market conditions in 2000-2002 that exposed several risks, including excessive investment leverage, mis-priced risks, reserving deficiencies, and loose asset-liability management, company management teams have taken corrective action by reducing risk exposures and raising several billion euros in capital through debt and equity issues as well as asset disposals. These actions have been the prime reason for the improved ratings of the European insurance industry, the report says.