The rating outlook for the Canadian Life insurance sector is stable for 2018, says Fitch Ratings. 

Fitch revised the fundamental sector outlook to stable from negative “due to better than expected operating performance and a benign credit environment, which is expected to persist over the near term,” stated Fitch in an announcement issued Dec. 4. 

Favorable conditions

The life insurance sector has benefitted from favorable conditions in the equity and credit market, as well as rising interest rates. Fitch says it expects a tightening monetary policy which will result in modestly higher rates for 2018. 

"Existing ratings reflect the Canadian life insurance industry's very strong balance sheet fundamentals, strong earnings and favorable liquidity profile, which help to mitigate the impact of low interest rates and potential credit market losses," says Fitch.

Ongoing challenges

Challenges to profitability include sustained low interest rates, financial market volatility and the underperformance of legacy businesses.

“The stable rating outlook assumes sustained improvement in economic growth and relatively stable unemployment levels over the near term,” says the rating agency.