4 December 2018 13:30
The firm credit rating Fitch Ratings expects the outlook for the canadian market of life insurance will be stable for the next year. Macroeconomic conditions generally favourable, will foster the growth of life insurance companies, said the company.
“We expect that the canadian life insurance companies maintain a strong capitalization and profitability indicators show a trend of stable or improving, supported by rising interest rates,” says Jamie Tucker, director of Fitch Ratings, in the report Outlook 2019 : Canadian Life Insurance.
Low interest rates offset
“However, the extension of the environment of low interest rates offsets these factors. The sector remains vulnerable to a market shock in excelsis, which we consider as inevitable due to the tightening of the part of the central bank and the uncertainty surrounding the world trade. “
Fitch expects that the three major canadian life insurers (Great-West Lifeco, Manulife and Sun Life) continue to dominate the market and take advantage of the benefits of scale that result. “Capitalization is expected to remain solid, the three canadian insurers that have declared ratios to test solvency of insurers-life (TSAV) of at least 130 % from the third quarter of 2018. The financial debt is considered manageable and consistent with the high-quality investment, which is expected to continue through 2018, ” stressed Fitch.
Because of the maturity of the canadian market for life insurance, the firm expects that insurers continue to diversify their sources of income in the emerging markets of strong growth, including in Asia.
While the rating agency expects to see underlying results solid with returns on equity ranging into the double digits in 2019, it also provides that the business under-performing, will remain a hindrance to the results. Fitch expects insurers to continue to find ways to ” rectify the situation through a restructuring and/or divestiture “.
According to Fitch, the liabilities, which ” remain exposed to the context of prolonged low interest rates include the insurance of long-term care, segregated funds with guarantees, and universal life insurance with guaranteed side. However, Fitch does not foresee a strengthening of the material reserves for the canadian life insurers because of the exposure of assets in 2019, ” the report says.