The biggest risk to European re/insurers’ balance sheets in 2019 is the potential for economic disruption, although most companies are well-positioned and prepared to withstand volatility, according to analysts at S&P Global Ratings.
A report by the rating agency highlighted the changing nature of the risk landscape ten years after the global financial crisis, with geopolitical uncertainties and technological advancements now presenting the biggest threats to the traditional business model for re/insurance.
Nevertheless, S&P remained confident that re/insurers in the European market would prove resilient, noting that 80% of its outlooks for the sector remain stable.
Additionally, management teams have successfully steered companies through a difficult period of recession and low interest rates by enhancing their understanding of risk and building strong balance sheets and capital positions.
As a result, S&P claims that European re/insurers are better prepared to face challenging economic conditions today than they were in 2008/2009.
In the near term, Brexit presents the greatest uncertainty for the European market, but analysts currently predict only outlook revisions in the UK sector following a no-deal exit, rather than widespread rating downgrades.
Looking ahead, S&P warned that long-term success would depend on the ability to react quickly to the increasing sophistication and demands of an evolving consumer base.
This will include greater integration of insurtech solutions, which have so far proved more complementary to the insurance business model than disruptive, analysts said.
Technological developments have largely helped insurers to increase efficiency and lower expenses, as well as to improve their responsiveness to regulators, which has reduced the expense and capacity burdens associated with regulatory compliance.
