Australian and New Zealand general insurers are financially strong and the sector’s outlook remains stable despite difficult business conditions, according to Standard and Poor’s (S&P).

Insurers are starting to recoup higher costs from currency depreciation and weather-related disasters through moderate price rises in some personal lines, the ratings agency says.

“The insurers we rate are very strong,” S&P analyst Caroline Strahan told insuranceNEWS.com.au. “They have very strong business and financial positions, which make them less susceptible to rating changes.”

But challenges abound, with pricing competition in the property and casualty insurance and reinsurance domains expected to remain fierce, and catastrophe risks at elevated levels.

“Insurers are still continuing to see – on renewals – requests for discounts,” Ms Strahan said.

“They have been able to retain their business but not… to put through price increases. It has been exacerbated by broker competition for business.”

Across the wider Asia-Pacific region, the credit trend for insurers is stable and industry growth is poised to outpace economic growth next year.

Fears about the slowing Chinese economy will not cloud the region’s overall growth prospects.

“Premium growth could maintain at the low double-digit level in emerging Asia, including China, outpacing most global markets,” S&P says

“The region’s low insurance penetration rates relative to more mature markets in North America and Europe, and its booming middle class, should support demand.”

Demand for cover in liability, cyber risk and workers’ compensation is expected to fuel take-up of insurance in developing Asian economies.

In southeast Asia, strong domestic consumption will offset fallout from a Chinese slowdown.

Prevailing low interest rates will keep a lid on investment income, and this is expected to affect life insurers more.

“We expect insurers to record modest investment performance,” S&P says. 

“Volatility in investment markets remains and may contribute to performance deterioration for some insurers. 

“In general though, the capitalisation of rated insurers is reasonably supportive to ratings.”

Investment yields for Chinese insurers, especially life players, are likely to fall after a series of rate cuts by the nation’s central bank pushed the benchmark lending rate to a record low.

Japanese insurers’ continued push into foreign markets and diversification into new products will lift the sector there to single-digit growth.