Stubbornly low interest rates are continuing to put downward pressure on the credit quality of insurers and hurting major companies’ share prices as a result. Attempts to raise premium levels often meet resistance, with consumers unwilling to pay higher rates. Should interest rates remain depressed for a prolonged period, insurers’ profitability will continue to erode. There may also be a solvency threat for some insurers in markets where policies include rigid long-term interest rate guarantees that are inadequately hedged, or assets and liabilities that are not duration-matched.
The NASDAQ Europe Insurance Index, a benchmark of investor confidence, correlated with the general financial performance of the European insurance industry, fell by 14.8% in the six months to January 20, 2016. It started at 1,417.91 points on July 22, 2015, hit a period high of 1,429.29 points on August 10, before falling and ending at 1,207.52 points. Insurance stocks were under severe pressure, with 21 out of 28 listings declining during the period. Thus, with the economy lukewarm and yields on bonds and other holdings seeming unlikely to inch up, are insurance stocks still a good bet for 2016? #MergentInc #industryreports #insurance
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