Moody’s Investors Service has changed its outlook on the French Property and Casualty (P&C) insurance sector from negative to stable, reflecting rising prices and lower claims frequency in the key motor insurance market.
French P&C insurers are also likely to benefit from a rise in interest rates, as they will gradually reduce pressure on investment returns, which account for the bulk of French non-life insurers’ profits.
However, Benjamin Serra, a Senior Vice President at Moody’s, said that the rating agency does not foresee a significant improvement in the P&C industry’s overall combined ratio.
“Competition remains fierce and extends to the property segment, while natural catastrophe-related claims are at high levels,” Serra explained. “As 2018 has been one of the driest years on record in France, the probability of a spike in drought-related subsidence claims increases.”
Moody’s outlook for the French life insurance sector also remains stable as companies continue to reduce payments to policyholders in order to offset declines in investment returns, while the weight of unit-linked products also continues to grow.
Net flows has increased for life insurance companies since H2 2017, but Moody’s does not expect this trend to be sustained, as outflows are structurally increasing.
Additionally, it will be challenging for life insurers to increase inflows as the move to unit-linked products will increasingly bring them into direct competition with asset managers, and will be exacerbated by the PACTE law in the retirement savings segment.
The life market also continues to be closely scrutinised by the government, and growth in areas like the health and protection markets is limited by competition between traditional insurers, health mutual, and provident associations.