Insurers and reinsurers in Western Europe posted solid performances in 2014 and retained their capital strength against a backdrop of economic calm, according to a new report from A.M. Best.
The report analyses the agency’s ratings actions through the year and shows that, given their strong balance sheets, Western European insurers’ and reinsurers’ issuer credit ratings have remained stable.
A.M. Best notes in the report that insurers and reinsurers in the region have experienced an uptick in ratings in the past few years.
Following the peak of the eurozone financial crisis at the end of 2011, companies have learnt lessons and taken steps to protect themselves from any further downturn.
“A.M. Best has noted that, in 2014, a few companies with high financial leverage have been reducing external borrowings gradually and focusing on capital management at a group level,” said Stefan Holzberger, managing director of analytics at the agency.
He added: “The low interest rate environment is conducive to debt refinancing, and new hybrid debt instruments are being structured in line with the requirements for capital credit under Solvency II.”
In 2015, A.M. Best has stated that it expects that heightened supervision will continue to add pressure to Western European reinsurers.
As they prepare for Solvency II and regulators attempt to strengthen their oversight, A. M. Best claimed companies will need to maintain their focus on “ensuring strong governance, internal controls and regulatory compliance”.
Holzberger commented: “A.M. Best expects further restructuring and centralisation of functions as companies seek to improve operating efficiency and capital fungibility.”
“Higher levels of retention by direct insurers are likely to continue, as well as a move toward the centralisation of reinsurance purchasing.”
