Standard & Poor's said the regional turmoil has hit the financial strength of Hong Kong insurers and has led the US-based agency to downgrade the credit ratings of some. In its latest Hong Kong Insurance Digest, the rating agency said volatile investment and economic conditions in Asia had left their mark on the industry. 'The turmoil has hit hard the insurers' premium growth, investment returns and their balance sheet strength,' S&P managing director of insurance in Asia-Pacific Ian Thompson said yesterday. S&P has adjusted the ratings of some SAR insurers in the past six months, following similar downgrades in South Korea, Indonesia and Thailand a year ago. 'This indicates Hong Kong has been no exception to the general downward trend in insurance ratings in Asia over the past year,' Mr Thompson said. 'The horizon remains clouded, with further downward pressure remaining. 'Domestic insurers need to re-examine their asset quality, investment mix, asset liability management practices, reserving conventions, and capital adequacy in the context of recent history. 'Critical to success will be a strong franchise, a supportive distribution network, sound underwriting practices and financial strength.' Despite the downward trend, Mr Thompson said most SAR insurers were still financially sound when compared with overseas counterparts. He described the outlook for the life insurance industry as positive, as less than half of the 6.5 million population had purchased life policies, and many life insurers had expanded their sales teams. He said the three top life insurers - American International Assurance, National Mutual Insurance and Manulife (International) - dominated the market, generating 60 per cent of the industry's premium income. The future of the general insurance industry remained negative, since profit and premium growth would be limited by the declining local economy, falling premium rates due to fierce competition, and escalating claims costs. 'Credit quality in this sector has begun to reflect these trends, although, on average, financial strength of rated companies is secure,' he said. Mr Thompson said some insurers would choose mergers and acquisitions to survive this tough period. Medium-sized general insurers in particular would seek partners in order to increase capital and reduce costs. S&P executive managing director Roy Taub said more insurance companies would seek credit ratings this year in a bid to show their financial strength. S&P has rated 19 local insurers.