Bloomberg Intelligence in its report, “Europe P&C Insurance Full-Year Outlook”, has forecasted that claims inflation is likely to remain a pronounced feature in 2024, as it has been in 2023.
The challenge that insurers face is not being able to increase rates enough to fully offset rising expenses, warns the analysis. This has been building since H1 2023; when Bloomberg reports that average premiums rose 9% but the European building-materials index was up 16%.
Consequently, the claims costs are rising faster than premiums and while this index is slowing, input costs will likely remain an issue. The rollout of IFRS 17 accounting that started in earnest with Q2 results has the potential to sharpen investor focus on book value and the return on it. The uncertainty caused by the new accounting rules isn’t likely to help sentiment in 2024, says the report.
Bloomberg explains that the share prices of European property and casualty insurer peer group rose 6.5% in euro terms (8.2% in dollars) year-to-date through December 5th, under-performing the Stoxx Europe 600 Index’s 11% increase amid concerns over the economic challenges posed by inflation and the ongoing geopolitical uncertainty. This maintained the recovery from March 2020’s lows, when shares plunged an average of 44% compared to the start of the year, a trend that has steadily reversed.
Additionally, European P&C shares have moved up in 2023, underperforming the broader market. The group underperformed the benchmark by 1.0%.
Although, the arrival of inflation and geopolitical uncertainty has continued to affect sentiment this year. Despite this, the rebound of some companies’ stocks reflects relief that the severity of losses from the war in Ukraine hasn’t been as bad as first feared.
European P&C insurers’ price returns were supported by robust business models in 2023, underpinned by strong capital bases. Recognition of that underlying strength doesn’t appear to be giving way to concerns about economic stability, inflation and war in Europe, says the research.
