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Low interest rates, regulatory conditions and political uncertainties present a year of change for insurers in 2017, S&P explained.
"Insurers will also have to meet evolving conduct of business regulations and navigate numerous political uncertainties, such as the developments related to Brexit and the election outcomes in many jurisdictions," said S&P analyst Lotfi Elbarhdadi.
Despite these challenges, the ratings agency said that its financial strength rating of most western European insurers – as well as others in the European, Asia and Middle East (EMEA) region – will remain intact.
"Top concerns for EMEA insurers in 2017 include continuing to adapt their business models to ultra-low interest rates, gaining seasonality in reporting and risk management under Solvency II, and coping with challenging economic conditions in the region's diverse developing and emerging markets," said Mr Elbarhdadi.
The competitive environment also remains tough, S&P said, and will force insurers to adapt their business models. “Given the decline in investment returns due to lower yields and constrained asset risk tolerances, we expect insurers will likely rely more heavily on other sources of earnings, generally increase the prices for the guarantees they offer, and optimise their cost structures to free up earnings potentials,” it explained.