According to a new report from Fitch Ratings, large Nordic insurers managed to maintain strong credit profiles throughout 2022, which was heavily supported by the resilient economic and operating environment within the Nordic region.
Analysts stated that Nordic economies – defined as Denmark, Finland, Norway and Sweden in the report – continue to perform well, despite increasing global economic headwinds.
According to Fitch, the majority of insurers’ consolidated Solvency II ratios disperse in the range between 170% and 200%, which remains in line with the expected internal target ranges.
At the same time, analysts highlighted how large Nordic insurance groups remain capitalised, which is underpinned by strong operating capital generation and limited sensitivity of solvency ratios to stress scenarios.
Additionally, non-life profitability benefited from lower claims frequency throughout the COVID-19 pandemic, as Fitch noted that in 2022, insurers reported increasing claims frequency as economic activity gradually returned to the levels it was at prior to the pandemic.
However, while this resulted in a slight increase in consolidated combined ratios from 2021, these continued to remain at strong levels typically below 90%, representing a level consistent with an ‘aa’ assessment based on Fitch’s Insurance Rating Criteria.
The report also addresses how high inflation in Nordic countries developed broadly in line with the EU average. Fitch added that insurers’ main focus is to stay ahead of the inflation curve and that they believe that large Nordic insurers will be able to increase premiums in line with claims and cost inflation.
Further, Fitch states that the majority of large Nordic insurers’ investment portfolios remain low risk and are dominated by good-quality fixed-income assets. Among Nordic countries, Swedish insurers’ portfolios carry the highest investment risk, driven by exposure to equities and alternatives.
Lastly, Fitch concludes by noting that the Nordic region together represents an insurance market of around EUR120 billion in GWP.
