Brexit turmoil only beginning to play out for life insurers

June 28, 2016 by Chris Hughes

(Bloomberg) — A crisis in financial markets normally equals a crisis in the insurance industry.Insurers have done plenty to defend themselves against the Brexit storm, but they are entering an environment where having enough capital will come a distant second to having a lot more than enough.

The companies’ problem is that they are big investors in financial assets, and the markets are moving in all the wrong directions. Stocks are falling while spreads on corporate bonds are widening. This diminishes the value of insurers’ assets. In the U.K., gilt yields are falling, too. That inflates the value of their long-term liabilities by reducing discount rates.

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Originally Posted at LifeHealthPro on June 28, 2016 by Chris Hughes.