Insurers around the world should be poised for a tougher year ahead, as low oil prices and rocky conditions in China lead to an unstable global economy. A recent report released by Standard & Poor’s Global Ratings Unit titled Insurers Worldwide Confront an Interlocking Puzzle of Factors That Make Growth Tough to Find reveals that underwriting performance has declined slightly in some markets due to a combination of local and macroeconomic challenges.

While some insurers will be able to coast through any hardship due to healthy capital, others may need to resort to downgrades, the report warns. However, the possible “hard landing” of the global economy is an “overarching” threat for insurers of all nationalities.

“For credit markets, worries about a debt overhang in emerging markets and the energy sector may undermine growth prospects and dim the outlook for both profits and ratings among global insurers,” states S&P in the report.

The report recapped the unique challenges faced by insurers in different markets.

• North American insurers will struggle with investment this year; low currency prices have led to unfavourable foreign exchange conditions for some, along with sliding commodity prices.
• The Asia-Pacific market will be vulnerable to increasingly volatile investment earnings over the coming two years. Some will be forced to raise premiums. Those overly leveraged in risk are most vulnerable to economic shifts.
• Latin America markets will benefit from higher rates, especially in Brazil and Mexico.
• Central and Eastern Europe / Middle East / African markets will face additional regulations, as well as challenges arising from capital and solvency requirements.