A new report from Fitch Ratings says that the Dutch insurance sector showed resilience in 1H22 despite mounting macroeconomic pressures.
The firm wrote in the Dutch Insurance Dashboard: 1H22 Interim Results that large Dutch insurers maintained robust solvency II ratios in 1H22 and broadly in line with a ‘aa’ assessment according to its insurance criteria.
Some insurers benefited from the increase in the EIOPA volatility adjuster drive by widening credit spreads, as well as the flattening of the yield curve. It said that it expected Solvency II ratios of insurers more exposed to Dutch mortgage loans and global equities to remain more volatile.
The authors wrote: “Some insurers benefited from the increase of the EIOPA volatility adjuster (VA) driven by widening credit spreads, as well as the flattening of the yield curve. S2 ratios of insurers that are more exposed to Dutch mortgage loans and global equities are expected to remain more volatile.
“In contrast to government and corporate bonds, the EIOPA VA does not compensate for the widening of Dutch mortgage loan spreads. A further tightening of short-term rates by central banks is unlikely to affect our assessment of insurers’ capital strength.”
The ratings agency also said that the credit quality of fixed-income portfolios was maintained at a strong level with no evidence of increased credit impairments or credit migrations in 1H22. Fitch expects large Dutch insurers are well positioned to absorb potential credit deterioration caused by macroeconomic developments.
The firm also observed that operating earnings held up well in 1H22 despite increased volatility in financial markets and inflationary pressures. Non-life insurers posted sound combined ratios, reflecting adequate buffers to absorb higher expenses. Key earnings drivers in the life segment remain cost effectiveness and investment margins.
