Global financial services ratings agency, A.M. Best, is maintaining its stable outlook for the Italian non-life insurance market, citing limited exposure to catastrophe losses and strong underwriting profitability.
Overall, A.M. Best expects that price increases will keep pace with claims inflation, suggesting that solid underwriting profitability will be maintained across the sector.
In addition, non-life players generally have little exposure to natural catastrophe losses, while solvency levels are viewed as sound and provide a buffer to absorb a certain level of financial market volatility.
Furthermore, A.M. Best highlights that when compared with Italian life insurers, non-life market players’ balance sheets are less sensitive to changes in credit spreads, which, continue to be stressed as a result of the COVID-19 pandemic.
While the outlook for the sector remains stable, Italy has experienced significant economic and financial implications from the ongoing pandemic. The country has been one of the most affected regions’ in the world and as the number of cases and deaths rose dramatically, it entered into a strict lockdown in an effort to mitigate the impact.
The resulting economic downturn is expected to put a stop to the expansion of Italy’s non-life insurance sector, especially in motor lines, says A.M. Best. At the same time, asset devaluations and continued volatility across all asset classes owing to the pandemic are putting pressure on both earnings and solvency positions, warns the ratings agency.
“AM Best expects the Italian non-life market to report modest growth in 2019, supported by the continued development of the non-motor insurance segment. In 2018, growth was driven by higher non-motor premium and an increase in motor premium, which grew for the first time since 2013,” says A.M. Best.
Adding, “However, AM Best expects premium volumes in the Italian non-life insurance market to drop significantly during the COVID-19 quarantine period. Although the expectation is that levels will quickly pick up once restrictions are relaxed, the pandemic is likely to have a negative impact on longer term premium growth as this is linked to economic growth.”
