Standard & Poor's says that insurers in the European life and savings markets are at risk because of low interest rates.

In a report released on Oct. 26, the ratings agency warned that low interest rates are the biggest danger faced by European life insurers, and suggested that they will continue to be a problem into 2017. S&P says that product features, pricing and guarantee structures, and asset allocations will all “play a major role” when it assesses an insurer's outlook.

According to S&P's research Germany, Austria, Belgium, the Netherlands, Norway, Denmark, Finland, Switzerland, and Sweden are the countries with the highest and longest traditional savings guarantees on existing business portfolios, while France and Italy tend to offer lower long-term guarantees. In Spain the ratings agency notes that there are high guarantees but these are offset by stringent matching of assets and liabilities, while in the UK companies have been shifting more of their investment risk to policyholders for some time, and therefore British insurers have fairly low exposure to interest rate risk.

"The earnings potential and capital adequacy of insurers more exposed to interest rate risk in our view will continue to gradually trend lower, and, all other things remaining equal, could lead to negative rating actions in coming years because of low interest rates," comments Standard & Poor's credit analyst Lotfi Elbarhdadi.