<strong>By: S&P Global Ratings</strong>

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<li>Recent signs suggesting that interest rates were starting to normalize have proved false, forcing insurers to revert to protective strategies.</li><li>Ratings on European insurers should be stable in 2020 and largely resilient to the low rate pressures for some time to come.</li><li>Regulatory and accounting changes will also absorb management time.</li><li>The transition of the global economy from manufacturing to service and technology, tangible to intangible, carbon-intensive to low-carbon presents tremendous opportunities and risks for insurers--not least in cybersecurity and climate change.</li>

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In a recent report published, S&P Global Ratings said that the long-hoped-for interest rate normalization appears to have suffered a false dawn (<a href="https://app.ratings.spglobal.com/V4M3003ris0S200Tge5fJF0" target="_blank" rel="noopener noreferrer">see "EMEA Insurers Buckle Down As Low Interest Rates Make An Unwelcome Return"</a>). As central banks have reversed course, insurers face low interest rates, by now a familiar foe, for the foreseeable future.

The global economy appears less resilient to financial shock than it was 10 years ago. The risk of recession in the U.S. has risen to an estimated 30%-35%, from 15%-20% this time last year.

In our view, credit fundamentals for rated European insurers remain strong and support our stable outlook on the sector. In particular, our ratings are still supported by insurers' robust capital positions.

For those insurers that can manage the low-rate pressure, the ongoing transition of the global economy presents a tremendous opportunity for the industry to demonstrate its value. As the composition of the economy shifts, the nature of risk and the types of protection demanded from corporations and individuals will change. Insurers must rethink their products to evolve with the market. As investors and underwriters, they also have a role in supporting the shift toward a more environmentally friendly and sustainable economy.

This report does not constitute a rating action.

<a href="https://www.cover.co.za/wp-content/uploads/2019/11/EMEA-Insurers_2020-Outlook_6-Nov.2019.pdf" target="_blank" rel="noopener noreferrer">Download the the report here</a>