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CFOs of European insurers concerned about muted economic growth: Moody’s

9th April 2019 - Author: Luke Gallin

Low economic growth and market volatility are the two top concerns for the Chief Financial Officers (CFOs) of European insurers. At the same time, insurers across the continent are increasingly leveraging technology in order to cut costs, according to Moody’s Investors Service’s European Insurance CFO survey.

Moody'sLow economic growth tops the list of concerns for European insurer CFOs in 2019, followed closely by market volatility, and then political or regulatory risks and the competitive environment. Further down the list comes persistently low interest rates, IFRS 17 implementation, inflation rate increase, and then a sharp rise in interest rates.

Survey respondents expect any increase in insurance demand to be minimal, or remain stable. Despite this, the vast majority of CFOs said that they expect operating profit to grow modestly when compared with the previous year.

“We expect life insurers to face more direct competition from banks and asset managers, particularly in France as a result of the PACTE law. P&C insurers, meanwhile, will likely face increased competition from reinsurers, which are continuing to diversify into commercial primary lines,” explains Moody’s.

“Globally, around 39% of reinsurers’ total premium revenue already comes from primary non-life premiums. InsurTech challengers are also expanding globally, and continue to attract fresh funding.”

In light of the very competitive operating landscape for much of the European insurance and reinsurance sector, efficiency has become key, with companies looking to cut costs in numerous ways in order to bolster profitability.

Interestingly, Moody’s explains that 90% of survey respondents continue to prioritise their investments in back office functionality, with ongoing investments in technology playing a key part in companies’ cost cutting actions.

The profitability of European insurers remains below pre-crisis levels, and the continued investments in technology to improve efficiency and maintain profitable growth is expected to persist in 2019.

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