European Insurers Face Same Issues As Companies In The U.S.

Solid results and stable ratings have European insurers channeling extra funds into acquisitions or capital initiatives, according to a recent report on the European market issued by Moody’s Investors Service, London.

The report notes that despite a few difficult years at the start of the decade, European insurers have rebounded and recently have actively pursued growth in far flung markets ranging from Central and Eastern Europe to India and China.

European insurers face some of the same trends that insurers in other parts of the world, such as the U.S., face, the report notes. For instance, it says that a demographic change will affect the risk profile of life insurers and longevity risk is also increasing because of longer life spans.

Dominic Simpson, senior credit officer with Moody’s in London, says there are trends that parallel what is going on in other parts of the world. For instance, he says, longevity risk is impacting annuity business. “Longevity risk is a global issue,” he continues.

This risk is also noted in a report on the Austrian insurance market issued by the Frankfurt office of Standard & Poor’s Corp. While risk for Austrian life insurers is considered moderate and the business outlook is favorable, the report states that longevity is a risk faced by these companies.

In Germany, according to an S&P report, the life insurance market is saturated with little room for growth, although it also notes that the level of concentration for individual companies remained largely stable between 1995 and 2005.

One company that says it is actively pursuing some of these trends, such as global growth and trying to address consumers’ concerns about living too long, is Aviva plc, London.

Aviva’s management team says the U.S. is a key part in its plan to become a global player and that fixed indexed annuities are a key part of establishing itself in the U.S.

“We are now very firmly classed as being international and are well on our way to being global,” Andrew Moss, Aviva’s group chief executive said during a recent briefing on the company’s plans.

For the first half of 2000, according to the company, 58% of ?12.8 billion in sales were from the United Kingdom, 33% from Europe, and 9% from North America. Asia Pacific and North America will have a bigger share of sales in 2007, according to the company which anticipates that the breakout for ?24.7 billion in half-year results will be: 42%, United Kingdom; 40%, Europe; 10%, North America; and 8%, Asia Pacific.