Insurers emerge unscathed from credit crisis
While 61% of Australian companies are in a “marginal” or “distressed” state of financial health, the insurance industry is looking good.
According to Melbourne-based business analysts Lincoln Indicators, research shows banking and insurance are the only two industries to report a 100% “strong” financial health rating. This is despite the financial sector suffering the full brunt of the global credit crisis, with lingering effects such as poor investment returns and difficulty obtaining lines of credit.
Lincoln CEO Elio D’Amato told insuranceNEWS.com.au insurance companies have kept out of trouble largely because they operate in a highly regulated environment, with the Australian Prudential Regulation Authority (APRA) ensuring companies self-regulate and maintain a low level of financial risk.
“The fact that insurance businesses were able to maintain best practice procedures even in the last two months of 2007 when risk was rife due to the credit crunch and the like, gave them a good sounding board to withstand it,” he said.
Mr D’Amato says while the credit crunch has affected the industry, insurers are now careful to not put all their investment eggs in one basket.
“It is not the first credit crunch we have had and will not be the last,” he said. “There are no certainties in this game.”
According to Melbourne-based business analysts Lincoln Indicators, research shows banking and insurance are the only two industries to report a 100% “strong” financial health rating. This is despite the financial sector suffering the full brunt of the global credit crisis, with lingering effects such as poor investment returns and difficulty obtaining lines of credit.
Lincoln CEO Elio D’Amato told insuranceNEWS.com.au insurance companies have kept out of trouble largely because they operate in a highly regulated environment, with the Australian Prudential Regulation Authority (APRA) ensuring companies self-regulate and maintain a low level of financial risk.
“The fact that insurance businesses were able to maintain best practice procedures even in the last two months of 2007 when risk was rife due to the credit crunch and the like, gave them a good sounding board to withstand it,” he said.
Mr D’Amato says while the credit crunch has affected the industry, insurers are now careful to not put all their investment eggs in one basket.
“It is not the first credit crunch we have had and will not be the last,” he said. “There are no certainties in this game.”