Bloomberg News

Insurers’ Balance Sheets Depleted by Europe’s Crisis, S&P Says

November 07, 2011

Nov. 4 (Bloomberg) -- Insurers’ balance sheets have been weakened by declining bond creditworthiness and a plunging equity market in the third quarter, Standard & Poor’s said.

The capital base of Europe’s so-called global multiline insurers, which sell both life and general insurance, has fallen as much as 15 percent on average since the middle of this year, the ratings company said in a report on insurance credit trends published today.

Economic growth will likely be weak for another year and a half, hurting insurers’ earnings, S&P said. European leaders persuaded bondholders last week to take 50 percent losses on Greek debt and boosted the firepower of the region’s rescue fund to 1 trillion euros ($1.4 trillion). European Central Bank President Mario Draghi yesterday cut key interest rates to help stem the debt crisis and revive the economy.

“The European insurance industry’s nervousness has grown,” S&P said. “Marking-to-market of insurers’ investments will have depleted balance sheets,” while lower rates, wider corporate bond spreads and falling stocks weigh on the prospects for future earnings, S&P said.

--Editors: Keith Campbell, Steve Bailey.

To contact the reporter on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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