Moody’s Investors Service has maintained its stable outlook for the Italian insurance industry amid a moderate premium growth in property and casualty and a favourable shift in the business mix for life insurers.
Underwriting profitability for P&C remains strong, notes Moody’s, driven in part by a recovery in premium growth and still-high reserve releases.
Moody’s expects reserve releases to taper off gradually, resulting in slightly lower but still strong profitability.
“The macroeconomic environment for Italian insurers remains challenging, as reflected in low economic growth and flat unemployment” said Christian Badorff, a Vice President at Moody’s.
“Nonetheless, the sector’s credit fundamentals continue to be relatively robust, reflecting healthy profitability and capitalisation.”
Additionally, life insurers have in recent years significantly reduced the high guaranteed rates of return promised to savings customers.
Moody’s says this, combined with relatively high investment returns, is supporting their investment margins.
The sector is also shifting towards hybrid products, which offer lower guaranteed rates, and towards unit-linked products, which shift the investment risk to the customer.
The industry’s solvency II ratios meanwhile are healthy at current levels, but solvency capital requirements generally do not reflect the credit risks associated with its large domestic sovereign bond exposures.
At the same time, Moody’s notes that solvency II ratios continue to be highly sensitive to movements in sovereign credit spreads.