Moody's forecasts trends for European market

The outlook for the European insurance industry is stable over the short-term, according to New York-based Moody's Investors Service, though over the longer-term rating changes are expected, thanks to pricing discipline and enhanced risk management, as well as mortality trends, the rating agency said.

In its report on the European insurance industry, Moody's said that following the problems in the earlier part of the decade, the balance sheets of European insurers have generally strengthened and risk management improved.

In addition, favorable equity markets and increased interest rates, among other factors, have meant that many European insurers now are focusing on growth.

Those growth plans could include mergers, acquisitions and operational restructuring, among other things, Moody's said.

Moody's added it expected Solvency II--the risk-based capital regime for European Union insurers anticipated for introduction in 2010--"to significantly enhance risk management practices across the European insurance industry."

Moody's said that while the nonlife sector currently is profitable for insurers, downward pressure on rates is increasing, which may lead to some companies losing underwriting discipline.