NU Online News Service, March 31, 2003, 12:42 p.m. EST – The surviving Canadian life insurers are very strong, but they face challenges from a shift in emphasis to retirement savings products and related products, according to a new report from the New York office of Moody's Investors Service.
The authors note that Canada ended 2001 with only 116 active life insurers, down from 163 in 1990.
The numbers are deceptive because, in reality, the five biggest carriers dominate the market, Moody's analysts observe.
Meanwhile, the Canadian population is staying younger than the populations of most rich countries, but it is aging, the Moody's analysts write.
The aging of the Canadian population is forcing Canadian life insurers to compete with banks, trust companies, securities brokers, mutual fund companies and other financial services companies for retirement services business, the analysts write.
"Barriers to entry to the retirement and related products market are low and there are no obvious capacity limits, placing the life insurers at a disadvantage," the analysts write.
The insurers might be tempted to compete by accepting lower profit margins and offering generous minimum-return guarantees.
But the Moody's analysts warn that stock market volatility could lead to big fluctuations in fee revenue. The analysts also warn that guaranteeing minimum levels of return also exposes insurers to more risk.
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