G-20 News

Life insurance sector outlook revised from negative to stable


Moody’s Investors Service said it had changed the outlook for the global life insurance industry from negative to stable for 2021.

The change in outlook reflects a recent change in outlook from stable to negative for life insurers in the United States and Japan, two of the world’s largest life insurance markets, according to Moody’s. It also reflects the improved growth prospects of the sector and the reduced likelihood of extreme short-term events, due to a more favorable global operating environment, aided by the improvement in individual health as vaccinations increase. mass reduce the spread of the virus.

Despite continued low interest rates, Moody’s expects the life insurance industry to remain stable over the next 18 months. Of the other countries where we still have a negative outlook, in some, like the UK, there have been signs of stability, both in the operating environment and at the individual company level, as evidenced by the strong profitability and solvency ratios. In other countries with a negative outlook, such as Germany and the Netherlands, life insurers face structural pressures on profitability and capital adequacy linked to persistently low yields.

The following factors underline the shift from a stable to negative outlook:

1.A rebound in the global economy will support industry growth

Moody’s predicts that the GDP of G-20 economies will grow 6.1% in 2021 and 4.4% in 2022, after contracting 3.2% last year. A growing economy, supported by the lifting of pandemic restrictions on most economic activities, will stimulate demand for life insurance products.

2. Strong capital adequacy helped insurers weather the pandemic

Globally, insurance companies entered 2020 with strong regulatory capital ratios, which were further bolstered by funds from debt issuance. Strong solvency ratios and strong liquidity have helped insurers weather the pandemic.

3.Mergers and Acquisitions Drive Business Transformation and Prepare Insurers for Post-COVID

Private capital is playing a key role in this industry transition, particularly in the United States, as it seeks to manage a greater share of insurance assets, often through mergers and acquisitions and other partnerships. or investments.

4.The pandemic is accelerating digitization

The pandemic-induced year of contactless virtual business interaction accelerated the digitization of life insurance sales processes that was already underway before the pandemic. Increased digitization will reduce costs for businesses as well as policyholders and, in the longer term, will make insurance more attractive to new generations of digitally-oriented buyers.