Fitch Ratings has changed its outlook for U.S. life insurers to 'negative.' This reflects the "significant deterioration" in the credit and equity markets and the expected impact of realized and unrealized investment losses on life insurers' capital levels and profitability," the Chicago-based firm says.
The industry downgrade from a 'stable' outlook also reflects "ongoing concern regarding the industry's expanding equity market exposure driven by growth in variable annuities, market performance guarantees which can add significant volatility to financial performance and capital in a period of unstable market conditions."
Fitch also says it is "concerned that liquidity pressures could develop if capital markets remain unstable and funding needs can not be met."
The 'negative' change in outlook means that over the next 12-18 months, Fitch expects more downgrades than upgrades across the life insurance industry but cautions that it does not mean all or most insurers will be downgraded.