Volatility in equity markets could weigh on the rating of French insurance companies in the coming months, as their potential difficulties to rebuild their capital base against an uncertain economic situation, says ratings agency Standard & Poor’s in a statement released Thursday.
“The operational performance restricted the growth of credit risk, the low interest rates as the volatility of equity markets continue to weigh on the ratings of French insurance companies,” said the rating agency.
Standard & Poor’s also notes that “the ability to adjust the volume of equity risk-based” has “deteriorated during 2011, to a low point not seen since five years.”
“Insurers that we assess could face obstacles to rebuild capital to levels consistent with their ratings in the 12 to 24 months, due to economic and financial conditions that remain uncertain,” write the analysis Standard & Poor’s.
Insurers also face “a risk-increasing credit deterioration following notes of countries, particularly Italy, Spain, Portugal, Ireland and Greece and their local financial institutions,” the statement said.
The agency points out “the substantial exposure of insurers to their counterparts in French and in particular government bonds in Italy and Spain”.