As per Fitch Ratings, non-life insurance premium rates are showing different trends across numerous European markets, following the rating agency’s mid-year review of insurance sector outlooks.
According to Fitch, non-life insurers have been looking to increase prices to offset high claims inflation and reinsurance costs, however their ability to do so varies, depending on local market dynamics.
“At the start of the year, we expected non-life insurers in the UK and Italy to be able to push through the strongest prices rises, with good prospects of a recovery in profitability due to price rises outpacing inflation,” Fitch said.
As a result, this drove Fitch’s ‘improving’ sector outlooks for the UK non-life company market, London insurance market and Italian non-life sector in 2024.
Elsewhere across Europe, Fitch stated that non-life sector outlooks were ‘neutral’, due to the agency believing that price rises were likely to be more constrained by competition or societal pressure.
Meanwhile, the German non-life sector outlook is also ‘improving’, as recent premium increases for motor and buildings insurance (the two main business lines) were well ahead of Fitch’s expectations, remarkably improving the prospects for profitability following an abrupt decline in 2023.
The agency explained that the full effects of higher prices, along with easing inflation and higher fixed-income yields, will take time to pass through to German insurers’ reported profits, and this will not become clear until 2025.
“Even in the UK and Italy, where strong price increases began sooner, the full benefits will not be felt until 2025 as premium rates have continued to rise this year,” Fitch added.
Moving forward, Fitch noted that the non-life sector outlooks in France, the Netherlands and Spain remain ‘neutral’.
“Price rises are unlikely to be as strong as in the UK, Italy and Germany due to market competition and societal pressure – a feature of the French market in particular – and it will take longer for profitability to recover from the effect of high claims inflation.”
Nonetheless, the agency is anticipating to see marginal improvements in underlying profitability this year, steered by a combination of modest price rises, easing claims inflation and higher fixed-income yields.
An important factor to conclude on, Fitch noted that it does not expect the heightened political uncertainty in France to have significant credit implications for the domestic insurance market.
If you recall, Fitch Ratings recently reported that the political uncertainty in France, stemming from President Emmanuel Macron’s call for an early parliamentary election, has not impacted the ratings of French insurers.
