Despite continued low interest rates, the outlook for the global life insurance sector in 2020 remains stable, according to Moody’s Investors Service Inc.
In a new report, the rating agency said that its outlook reflects “insurers’ solid regulatory capital and relatively conservative investment portfolios, and their efforts to adapt their products to a low interest rate environment.”
Moody’s said that the economic environment remains supportive of industry growth, but the slowing global economy will not support rising interest rates.
“Low interest rates are the key risk facing the sector after falling to fresh lows and forcing life insurers to reinvest maturing assets at lower yields, weighing on their investment income, and increasing their appetite for higher-yielding, and higher risk assets,” said Dominic Simpson, vice president and senior credit officer at Moody’s.
The report said that insurers’ ongoing shift toward fee-based products that are less sensitive to interest rates is providing the sector with some insulation against low rates.
Additionally, insurers’ capital levels have benefited from strong equity markets and industry profitability, Moody’s said.
Finally, while innovative “insurtech” companies could disrupt certain business lines, Moody’s said that “a growing trend of collaboration will help modernize the life insurance sector” and guard against disruption.