The outlook for insurers in the Asia-Pacific region is stable but new market challenges continue to pose industry risks, according to Standard & Poor’s (S&P).

In its latest report on the Asia-Pacific insurance industry, the ratings agency puts the softening market and volatile investment environments among those challenges, and it backs up analyst concerns that the local market is slipping back into some old bad habits.

S&P credit analyst and regional MD Ian Thompson says the industry has passed the cyclical peak and is weakening, despite insurers’ pledges that they will not return to a soft market.

Profits will be recorded across the region in 2004, but at much lower levels than in 2003. S&P says the industry continues to show signs of returning to less-disciplined practices in Asia’s over-serviced insurance market.

The report shows that market consolidation in Australia and Japan is playing a part in eliminating weaker companies, but an overabundance of underwriters in some parts of Asia means that consumers are dealing with riskier companies.

Mr Thompson, who is based in Melbourne, says companies without viable market positions will continue to weaken at different paces, and consolidation may take years in countries with high private ownership or fragmented markets.