The outlook for the life insurance industry in Australia and NZ is “volatile”, according to ratings agency Standard & Poor’s (S&P). In its annual report on the state of the industry, S&P’s says last year saw the life insurance market experience “significant downturns” thanks to plummeting global equity markets. This has eroded capitalisation, reduced fee income and lowered product revenue.

And S&P says this year is every bit as bad. Analyst Kate Thomson says the review comes as Australia’s and NZ’s life insurers contend not only with a changing consumer product dynamic, but also rapidly changing equity market values.

“A large number of insurance companies had their rating lowered in 2002, including AMP, Tower and Royal & SunAlliance, and several life ratings remain on CreditWatch, highlighting ongoing difficulties faced by the industry in 2003,” she said.

“We expect that the industry in 2003 will face the same difficulties as it did last year.”