Fitch Ratings’ mid-year review of the insurance sector reveals varied trends in non-life insurance premium rates across European markets. The rating agency highlights that while non-life insurers aim to raise prices to counter high claims inflation and reinsurance costs, their success in doing so hinges on local market dynamics.
Fitch observes that non-life insurers in the UK and Italy are well-positioned to implement significant price hikes. “At the start of the year, we expected non-life insurers in the UK and Italy to be able to push through the strongest price rises, with good prospects of a recovery in profitability due to price rises outpacing inflation,” the agency stated. This outlook has led Fitch to designate the UK non-life company market, the London insurance market, and the Italian non-life sector with an ‘improving’ sector outlook for 2024.
Conversely, the agency maintains a ‘neutral’ outlook for the non-life sectors in other parts of Europe, attributing this to competition and societal pressures that are likely to constrain price increases. In Germany, however, the non-life sector outlook is ‘improving’ as recent premium increases for motor and buildings insurance—key business lines—have exceeded expectations. This surge in premiums promises a rebound in profitability after a sharp decline in 2023. Fitch notes that the benefits of these higher prices, combined with easing inflation and higher fixed-income yields, will take time to reflect in insurers’ reported profits, likely not becoming evident 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. Meanwhile, Fitch’s outlook for the non-life sectors in France, the Netherlands, and Spain remains ‘neutral.’ The agency attributes this to competitive pressures and societal factors, particularly in the French market, which are likely to moderate price increases. Consequently, profitability recovery in these markets is expected to be gradual.
Despite these challenges, Fitch anticipates marginal improvements in underlying profitability this year, driven by modest price rises, easing claims inflation, and higher fixed-income yields. The agency also downplays concerns over political uncertainty in France, asserting that it is unlikely to have significant credit implications for the domestic insurance market. Recently, Fitch reported that President Emmanuel Macron’s call for an early parliamentary election has not impacted the ratings of French insurers.
In summary, Fitch’s report underscores the varying ability of non-life insurers across Europe to raise premiums in response to inflation and reinsurance costs, with notable disparities in market dynamics influencing profitability prospects.
