2010 won’t be a very good year for U.S. P&C insurers, as evidenced by reports yesterday from Fitch Ratings. And, now, the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS), the umbrella body for European Union insurance regulators, reports European insurers are not exempt from a poor 2010.
The outlook for insurers is uncertain, as a prolonged period of rock-bottom rates weighs on investment returns, while a potential acceleration of the swine flu pandemic poses an additional threat, CEIOPS says. "The insurance industry as a whole faces several risks and challenges going forward, of which the most prevalent are financial risks," it says.
The European Central Bank has cut rates by 4 percentage points to a record low of 1% since the onset of the global financial crisis in October 2008, and forecasters expect it to raise borrowing costs only to 1.5% by the end of next year, according to a Reuters poll.
While the H1N1 flu outbreak is likely on current evidence to have only a "minor" impact on the insurers through claims on health insurance and business disruption policies, CEIOPS says uncertainties remained regarding the future course of disease.
CEIOPS adds that while a recovery in stock and bond markets from last year's crisis has shored up European insurers' finances this year, their own collective market value is still 70% down compared with mid-2007.
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