Recovery in the Irish labour market will boost sales of life insurance, rating agency Standard & Poor’s has said.
In its latest assessment of Ireland’s life insurance sector, the agency said it continues to attach an “intermediate risk” rating to the industry here.
The agency said its assessment captures the typical level of risk faced by life insurers in Ireland, and reflects its view of low country risk and intermediate industry risk.
S&P’s base-case scenario forecasts a 4.2 per cent jump in real gross domestic product for 2015 and 3.8 per cent in 2016. It also assumes a fall in unemployment to 7.5 per cent by 2017.
Since the third quarter of 2013, it said domestic activity has started to replace foreign-owned sectors as the key driver of the Irish economy.
“These improved economic prospects will support the life insurance sector,” it said, noting increased employment will lead to increased contributions to life insurance and savings products.
It assesses the country risk as “low”, compared with “intermediate” in 2014, reflecting the recent upgrade in the State’s sovereign credit ratings , the Government’s fiscal performance, higher State asset sales and robust economic performance.
Nonetheless, it notes disposable income remains constrained, due to still-high personal debt and lower income than before the 2008 global financial crisis, despite the recent end to austerity measures.
Its assesses the industry risk for the Irish life here as “intermediate”, based on five industry-related criteria - profitability, product risk, barriers to entry, market growth prospects and the institutional framework.
S&P said the Irish life insurance sector is one of the many European life sectors that it assess as having intermediate risk- alongside Norway, Sweden, Spain, Denmark, and Finland.
“We do not anticipate that our industry and country risk assessment for Ireland’s life sector will change over the next two-to-three years, based on the strength of country risk in our overall assessment,” it said, noting both industry and country risk would have to shift significantly to alter its overall view.
