Despite persistent market challenges, rated European re/insurers continue to show resilience while maintaining a strong balance-sheet and a diversified business profile, according to global ratings agency, A.M. Best.
In light of the challenging market landscape, which is underlined by the ongoing low interest rate environment, a round of reserve strengthening in response to the Ogden rate change and intense competition, A.M. Best has analysed its rated European insurance companies and the market, including those with reinsurance operations (but not pure reinsurance companies).
Overall, the rating agency states that the European market is becoming more challenging and more concentrated, with just a few companies expanding profitably, while others are losing premium and an important share of their profits.
But despite this, the ratings agency explains that analysis of its European Long-Term Issuer Credit Ratings (Long-Term ICR), reveals that generally, firms are “well-capitalised and all have a Long-Term ICR of “bbb-” or higher.”
The analysis shows that 85% of A.M. Best rated entities’ Long Term ICR outlooks are stable, with 7% being positive, 6% negative, and 2% developing.
Interestingly, A.M. Best explains that the positive outlooks were concentrated in a few well-established names, “mainly in the reinsurance sector.”
The majority of these ratings, according to A.M. Best, are already within the “Excellent” or “Superior” range and, the companies demonstrated consistency in their financial results as well as a resilient balance sheet.
All of this is in light of very difficult market conditions, underlined by ample capacity, intense competition and also the benign loss experience. However, losses in 2017 have increased when compared with previous years, especially regarding natural catastrophes, so it will be interesting to see how resilient companies are come the end of the year, and into 2018.
Carlos Wong-Fupuy, Senior Director at A.M. Best, commented; “Analysis of all European insurers rated by A.M. Best shows 85% of Long-Term ICR outlooks are stable, 7% positive, 6% negative and the remainder developing. The positive outlooks are concentrated in a few well-established names, mainly in the reinsurance sector. They have demonstrated consistency in their financial results as well as a resilient balance sheet, despite difficult market conditions. Negative outlooks, on the other hand, reflect a more mixed picture.
“They include a few small niche companies as well as some high-profile groups. The main drivers putting negative pressure on the ratings range from weak technical performance to concerns about internal controls and the financial strength of new parent companies.”
