Ireland’s life insurance sector is showing “clear signs of growth” according to ratings agency Standard & Poor’s.

In a report on the sector, S&P said that Ireland’s solid economic growth prospects are likely to underpin further improvements in the Government’s budgetary position.

“We consider that Ireland’s life insurance sector benefits from the country’s favourable demographics, openness, and labour and product market flexibility,” the ratings agency said.

Despite prolonged interest rates, S&P said these have had less of an effect on returns and reserve levels in Ireland than in other European countries, because most products in Ireland are unit-linked and sold without guarantees. Moreover, while investment returns have declined, credit has not noticeably deteriorated.

Excessive risk-taking

“We expect returns to remain broadly consistent in future, assuming that increased competition will not lead to excessive risk-taking and supported by improved demographics and salary inflation.”

Given these positive growth and profitability trends, S&P says it would revise its assessment to low from intermediate if it sees signs the banking system will become profitable again and experience systemwide net credit growth.

“We would need to see a track record of no failures before we revise our overall institutional framework assessment upward,” the ratings agency said.

S&P said Ireland’s life sector is comparable to developed life insurance markets including Finland, Denmark, Austria, Netherlands, Norway, Sweden and Spain.