Despite varied risk profiles, the credit quality of most insurers in the Asia-Pacific region will remain stable for the remainder of 2005 and into 2006, according to the latest "Asia-Pacific Insurance Outlook" report launched Wednesday in Hong Kong by Standard & Poor's Ratings Services.

"This prognosis is predicated largely on the strengthened balance sheet of the insurance industry in recent years, although there are challenges ahead for life and nonlife insurance players in the region," said Standard & Poor's credit analyst Paul Clarkson of the Financial Services Ratings group.

"For the life insurance industry, the stable outlook also reflects the improved investment markets, strong growth dynamics in most of the markets, and improved earnings," said credit analyst Connie Wong. "These supportive factors, however, are offset by moderating factors, such as negative spread and limited flexibility in investment management, in some markets."

"For the nonlife insurance industry, the stable outlook reflects the continued expectation of supportive earnings and stable financial profiles, even though the region is entering a softer pricing environment," said Paul Clarkson.

"Strengthened balance sheets will provide some resilience compared with the previous softer underwriting cycle in 2000-2001,but price competition and the engagement of less disciplined underwriting pose a significant risk of an even stronger erosion of profits," he said. According to Standard & Poor's, the insurance markets vary markedly within the Asia-Pacific region. From relatively undeveloped to fully developed, they differ in products, distribution, management, and technical sophistication.

Some, like Hong Kong and Singapore, are totally open. Others, such as Chinese Mainland and Taiwan, are tightly regulated.

Some of the markets, in particular New Zealand and Malaysia nonlife, are strong performers and generate relatively stable profits. Others, including Taiwan, Philippines, and Japan, are volatile, catastrophe prone, or beleaguered by negative spreads and soft pricing.

Source: Xinhua