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The challenges facing life insurers by 2020

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August 14, 2019 09:30

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Life insurers are well capitalized and generate a strong operating profit, despite the context of weak performance extended, while the three largest canadian life insurers are benefiting from growth outside of Canada, says the firm’s rating DBRS in an analysis. However, the industry will face challenges over the next year.

Life insurers have enjoyed a good momentum in the premium growth, supported mainly by the sector of the benefits and DBRS says expect to see this growth continue in 2019, at both national and international.

Since August 2019, most life insurance companies have stable trends with financial strength ratings ranging from ” A ” to ” AA ” for the sector.

Challenges to provide

However, several challenges and factors affect the prospects for life insurers after 2019. These include the economic uncertainties and market environment of low yields, accounting changes and regulatory constraints, and the ability to take advantage of developments in the field of systems and technologies.

In total, the sector of life insurance has experienced good growth in the premiums written direct for the past three years, but DBRS cautions that growth in Canada will likely slow by 2020.

Although the majority of the premiums written by the canadian segment of the life insurance continue to originate in Canada, the premiums issued outside of the Canada are growing more quickly, in particular in respect of Great-West Life, Manulife and Sun Life.

Growth in Asia

DBRS expects that the international business continues to contribute significantly to the growth of premiums in the canadian life insurance companies life, especially in Asia. Given the maturity of the canadian market, the organic growth in Canada is likely to be limited by the growth of nominal GDP, according to the rating agency.

In Canada, individual annuities and group pensions, continue to enjoy the same growth that they have undergone over the past two years, while employers are seeking solutions to reduce the risks associated with their defined benefit plans.

“DBRS believes that the canadian sector of life insurance is relatively well placed to meet the challenges it faces, supported by its strong capital levels and its earnings. In general, life insurers manage their exposure to interest rate and equity market focusing their portfolio of products to offers that are less sensitive to capital in order to maintain capitalization ratios regulatory healthy, ” says Hema Singh, vice-president of DBRS.

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