Analysts at Fitch Ratings have stated that they expect volatility in Dutch insurers’ Solvency II ratios to increase, due to the insurers’ exposure to fluctuating equity and real-estate prices, as well as widening credit spreads and potential credit deterioration.
The impact, however, is more emphasised for insurers with less conservative investment portfolios. Nevertheless, Fitch highlights that insurers are entering an expectedly more volatile period with extremely strong capitalisation, and therefore solvency deteriorating to a level that affects ratings is unlikely.
Analysts also note that underwriting margins could come under pressure in case insurers do not, or only partially, pass on the cost of inflation to policyholders.
However, Non-life insurers are said to be in a good position to absorb higher expenses as combined ratios have improved significantly over the past five years.
Inflation is expected to be persistent, easing only in 2023 in the eurozone.
Furthermore, in the short term, both the re-pricing of equity, and the expected re-pricing of real estate assets as a result of rising interest rates, will be negative for investment performance. But, analysts point out that higher rates are long-term positive for the insurers through reduced re-investment risk, and through higher expected investment yields on bond portfolios.
Lastly, analysts noted that earnings rebounded in 2021, which were supported by the good performance of both life and non-life insurance, and the contribution of international markets.
Investment performance remained strong as financial and real estate markets performed well throughout the year, and pandemic lockdowns kept non-life claims at a low level.
