Europe’s largest insurers set to maintain financial leverage between 23-25% over next 18 months

Written by Adam Cadle

04/12/2019

Europe’s largest insurers are set to maintain a financial leverage between 23% to 25% over the next 18 months.

According to Moody’s Investors Services, some insurers may take advantage of current ultra-low interest rates to increase borrowing, but with others focused on reducing debt, no material change in total leverage is foreseen.

Some insurers may also be reluctant to increase borrowing because their current low leverage levels primarily reflect the positive impact on shareholders’ equity of falling interest rates under the IFRS accounting regime, rather than a real economic improvement in their leverage position.

However, following the decline in interest rates during 2019 and the adverse impact this has had on the sector’s Solvency II ratios, some insurers may turn to debt markets to restore their capitalisation, the firm said.

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