US life insurers ‘more vulnerable’ to economic downturn compared to UK counterparts

Written by Adam Cadle

15/06/2020

US life insurers are more vulnerable to an economic downturn compared to their UK counterparts, due to the fact they have almost three quarters of their investments in corporate bonds, GlobalData has said.

A 49.7 percentage-point difference currently exists in corporate bond investment between US and UK life insurers, according to the firm. “It also illustrates that the UK has a certain amount locked up in the relatively safe government securities, while this is not available in the US,” it added.

Investments made by insurers are vulnerable to the economic impacts caused by COVID-19. With a combination of volatility in financial markets, the increasing cost of claims and a looming economic recession increasing the pressure on insurers’ balance sheets.

GlobalData’s senior insurance analyst, Daniel Pearce, commented: “The pressure placed on insurers has led to concerns for some providers. Ratings agency Fitch recently downgraded the credit ratings of life insurers operating across the US, the UK and Europe."

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