UK - Life companies are being warned to "tread cautiously" into the pensions market following the post-September 11 slump.
Ratings agency Standard & Poor’s (S&P) said the post-September 11 market downturn had a negative impact on a number of life insurance markets, which have historically kept a large portion of their assets in equities.
S&P said the situation had been exacerbated by many life insurers now wanting to participate in the pension market.
S&P financial services ratings director Christen Dinesen said: Life insurers entering the much changed pension market, for example in Sweden, Germany, and the UK, will need to operate at extremely testing levels of expenses, and this pressure is likely to result in them paying close attention to a number of expense areas.
S&P explained that the global insurance market was exploring ways to become more cost-efficient as it looked to stabilise its investment profitability in the wake of significant losses from World Trade Centre terrorist attacks.
“As a result of the lower levels of investment income, insurers are increasingly focusing on technical results such as their level of expenses,” said the firm.
“Consequently, it is likely that most insurers will nevertheless need to review and seek to improve their level of expenses.”
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