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The Actuary The magazine of the Institute & Faculty of Actuaries

European non-life insurance market facing critical juncture

AM Best's report said ongoing recession in many countries, volatile financial markets and the sovereign debt crisis have buffeted the industry. It said companies are racing to meet changing solvency and accounting rules while the soft markets persist, dampening pricing and profitability.

The report 'European Non-Life Sector Approaches Economic, Regulatory Turning Points' said:"Stubbornly low interest rates are placing pressure on insurers'results, offering no relief from weak underwriting results driven by flat to downward pricing trends."

It added that economic twists, such as inflation and, in some cases, unsustainable sovereign debts, could trouble non-life insurers in the future.

In terms of regulation the report said: "Solvency II remains near the top of insurers'regulatory agendas, but with talk that Solvency II capital requirements may not take full effect until 2014, uncertainty persists around this issue."

It said slow-moving implementation has "been costly already and promises to further strain insurers with its potentially stricter risk-based capital requirements".

The report finds Germany has fared better economically than many of its neighbours,and German non-life insurers saw premiums increase in 2010 by 0.9% to E55.2bn, though technical results deteriorated.

Results for 2010 French non-life sector also improved, and 2011 shows it is developing favorably with rate increases in both personal and commercial lines and low catastrophe-related losses.

The Italian non-life sector has sustained legislative, regulatory and judicial blows that directly cut into insurers' results.

And despite economic and pricing pressures, Spanish non-life gross premiums written rose slightly in 2010, ending two years of shrinkage.

Source: Insurance Insight