Large Dutch insurers have achieved solid results in the first half of 2023; they have managed to compensate the effect of high inflation in core insurance lines through price increases and achieved broadly stable underwriting results, Fitch Ratings reports.
The inflation rate in the Netherlands peaked in the second half of 2022, since then, it has been in a disinflationary trend, reducing pressure on insurance premium rates and costs, Fitch states.
The greater stability of financial markets in H1 2023 and slightly lower long-term interest rates supported insurers’ investment results. The development of leading Dutch insurers’ S2 ratios were mixed, but they remained very strong at end-H1 2023.
According to the report, the credit quality of fixed-income and mortgage portfolios remained high and stable with very low impairment levels – a factor that also supported investment performance.
However, analysts warn, investment property portfolio valuations are under pressure from higher interest rates, which resulted in moderate fair-value markdowns for most insurers.
Fitch has also observed that claims submitted by lenders to the National Mortgage Guarantee (NHG) fund have remained at very low levels in the period.
There was only a small rise in the claim ratio in the second quarter of 2023, which overall, indicates the continued strong performance of the Dutch residential mortgage market.
Delinquency rates and NHG pay-outs could increase further in the coming quarters due to economic uncertainty and a softer Dutch housing market
“Fitch expects any deterioration to remain limited and not to significantly affect the quality and performance of residential mortgage portfolios,” analysts stated.
Analysts also noted that the application of IFRS 17 has had a positive accounting impact through the discounting effect, and noted that it will not affect insurers’ key performance indicators or strategy.
In addition to this, premium rate increases, better investment results and fairly benign weather supported combined ratios in the period.
