North American life insurers, despite having sound financial foundations, are susceptible to external circumstances that could dampen their economic outlook and hinder their overall financial health.
According to a Standard & Poor’s Rating Services’ report titled, North American Life Insurers Have Strong Balance Sheets, But Macroeconomic Headwinds Linger, the industry faces many challenges over the next year, most of which are out of their immediate control.
Standard & Poor’s foresee slow growth and a weak global economy in the coming year. Coupled with low interest rates, at least through 2014, and strong competition amongst carriers, insurers can expect to see limited revenue growth that will impede the potential for higher operating margins.
Because many blocks of business are already close to or at their guaranteed minimum interest rates, insurers could see their net interest margins cut into.