It comes as shares in the world’s largest life insurers and pensions companies continued to regain some of the ground lost since Britain’s decision to leave the European Union went public on Friday.
On Monday, Standard Life and Axa were the hardest hit as international life shares plunged – with the pound nose-diving to a fresh 31-year low against the dollar.
Quintet of negatives
Life assurers are not out of the woods yet, say analysts at Deutsche Bank, who believe the industry faces a “quintet of negatives” in the post-Brexit era including increased market volatility, lower core bond yields, higher corporate bond spreads, higher sovereign spreads and lower equity valuations.
The return on UK government bonds on Wednesday remained close to the record low reached on Monday, when the yield from a 10-year gilt dropped below 1% for the first time - signalling that the Bank of England will cut rates in a bid to shore up the pound.
Demand for government bonds rose after the referendum - pushing up bond prices and when the price of bonds rises their yield falls.
Credit rating agency Moody's has also downgraded its outlook on the ratings of a number of UK banks and insurers.
In addition, a new report published by the bank found that the biggest threat is how Brexit will affect their capital ratios - the buffer between its assets and liabilities - with UK insurer Prudential suffering the biggest hit, followed by L&G and Aviva.
A predicted cut in interest rates will increase the value of liabilities, eating into an insurer's solvency buffer, Ned Cazalet, a life industry analyst who runs research firm Cazalet Consulting, told International Adviser on Monday.
Describing the industry as “not yet at danger levels but selectively more vulnerable to further stress”, Deutsche Bank predicts that Prudential and its rival L&G are particularly vulnerable to market volatility, tipping Aviva and Standard Life as the most resilient.
The research puts current solvency ratios at 166% for Prudential, 160% for L&G and 173% for Aviva – comparing it to a minimum sensible level of 150%.
Cazalet also believes life companies are particularly vulnerable to market stresses due to their investments in the banks, which have been hit the hardest in the aftermath of the Brexit vote.
“A lot of insurers are holding corporate debt, a substantial chunk of the corporate bonds are issued by the banks.”
Generali, Italy's largest insurer, is particularly exposed after some of the nation's biggest banks saw up to 60% wiped off their value since Friday prompting reports of a possile €40bn ($44.2bn, £33.2bn) EU bailout.
Shares in the life company have fallen 20% since Friday, although they were last seen rising 2.36% on Wednesday.
Zurich shares have been the least affected with only a 1.9% hit overall, coming in at 4% higher on Wednesday.
Old Mutual stock has proved the most resilient to Brexit volatility, rising 2.6% and falling just 3% overall.
However, Dutch-headquartered Aegon is still feeling the tremors from the Brexit fallout, with shares dipping a further 1.15% on Wednesday – adding to an overall fall of 19%.
International life company Standard Life, which saw its shares plunge by nearly 23% following Friday’s result, has since experienced a recovery of 5%.
UK insurer Aviva, which on Monday said its capital position is "resilient to market stress", saw its shares climb by 4.43%, experiencing a moderate fall of 13% overall compared to Monday where it stood at 20%.
Europe’s largest insurer, Axa’s share price rose by 3.69%, offsetting some of its 19% post-Brexit loss.
Meanwhile, Prudential’s stock rose by 3.19%, recouping the 15% drop seen since Friday.