General Insurance Article - Fitch reviews reinsurer investment scenario


 Fitch Ratings expects reinsurers to continue to abide by their core investment principles in the face of a possibly protracted low-yielding investment environment. Nevertheless, some smaller reinsurers are preferring to keep asset duration to a minimum of about one year) as they seek to reduce the balance-sheet solvency) shock which could occur when interest rates rise, while also providing the opportunity to reinvest earlier at higher interest rates, according to a new report.

 Fitch expects reinsurers to remain focused on maintaining sufficient liquidity to meet and settle liabilities in a timely manner, and avoiding excessive balance sheet volatility. Inability to accomplish this due to a lack of adequate liquidity could have negative outcomes including regulatory intervention, rating downgrades and loss of confidence by policyholders and investors. 

 "In general, eurozone concerns and potential shocks to investment assets are trumping reinsurers' desire for higher yields," says Martyn Street, director in Fitch's Insurance rating group. "While conventional wisdom advocates closely matching the duration of assets and liabilities, some smaller companies appear less inclined to follow this approach rigidly." 

 Major sovereign bonds now yield around 0.5%, compared with 4-5% in mid-2007. As yields remain persistently low, reinsurers' attention has turned to the asset side of the balance sheet. Uncertainty created by the macroeconomic environment, and the implications for yields on certain key asset classes of policymakers' handling of the crisis have made decisions more challenging. Attention has been focused by the reality of reinvesting maturing bonds at significantly lower yields. 

 Fitch regards direct exposure to the eurozone debt crisis as manageable overall for reinsurers, although contagion would be a concern. The broadening of the eurozone sovereign crisis is intertwined with the investment challenges created for reinsurers by the current and future level of interest rates. 

Back to Index


Similar News to this Story

Sleighing the risks by giving Santa the insurance he needs
While you might be the most magical employer in the world, we know that even you aren’t immune to the risks of running a global delivery service! From
Diversity improving in insurance and long term savings
Key figures from the Association of British Insurers’ latest Diversity, Equity and Inclusion (DEI) data collection highlight the work of insurers and
Almost a third of homeowners have been victims of burglaries
Research commissioned by Co-op Insurance reveals that almost one in three (29%) homeowners have been the victims of theft from their home. The member-

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.