Life insurance in the US appears to be doing quite well in terms of economic success. According to the Standard & Poor’s Ratings Service, the outlook for this sector of the market appears to be stabilizing. The rating organization said that the entire industry appears to be doing much better in terms of improving credit.
This is a result of recovery, both on balance sheets and in the financial markets as well. In addition to this, the industry has improved its risk management, which is a good thing considering the the purpose of the insurance industry is to manage risk.
Despite these improvements, Standard & Poor’s does not expect to upgrade its ratings for the industry in the near future. According to an analyst named Matthew Carroll, the level of competition in the industry is very heavy, and the interest rates are very low.
The financial crisis and the following downturn in the economy that started in 2008 reduced the number of people who were interested in insurance. This caused the industry to compete more fiercely over this smaller customer base.
As the same time, the consistently low interest rates made it difficult for life insurance companies to remain profitable. Those insurers that sold variable annuities or spread-based products were hit especially hard because of the fact that these products guaranteed higher rates of return to their customers than current trends in the market could sustain.
In addition to this, Carroll pointed to the fact that insurers could still experience losses as a result of commercial real estate.
Even so, the rate at which Standard & Poor’s downgrades have taken place within the industry has been reduced during this year. The percentage of insurers in the industry that either have a negative outlook or are on watch for a downgrade has become smaller. Unfortunately, only six percent of the insurers rated by the organization are expected to have a positive growth in the near future.