Moody’s outlook remains stable for the Nordic property and casualty (P&C) and life insurance sectors, which according to the firm, reflects both sectors’ robust overall profitability and solvency.
Analysts at Moody’s have suggested that improving economic conditions will drive growth in sales of both P&C and life products.
The firm explained: “In the P&C sector continued price increases will offset higher claims, supporting underwriting profitability, while life insurers’ earnings and capitalization will benefit from still-high interest rates. Recent positive equity market performance has improved life insurers’ investment returns and bolstered sales of unit-linked products, increasing assets under management and fee-based income.”
The rating agency added that it expects GDP growth to recover across most Nordic countries in 2024, and to accelerate in 2025. However, the exception is Finland, where growth will stagnate this year and begin to pick up in 2025, the firm noted.
In addition, analysts addressed how throughout 2023, Nordic P&C and life insurers’ investment returns saw a notable improvement, which was primarily driven by higher interest rates and robust equity markets.
Moving forward, Moody’s expects rates to remain relatively high despite recent monetary easing, which should ultimately provide continued support to insurers’ investment income and profitability.
As well as this, analysts expect price increases to support P&C underwriting profit across the sector.
“We expect Nordic P&C insurers’ underwriting profitability to remain robust, with price increases continuing to offset rising claims. While growth in property claims costs has eased, motor claims inflation remains high and frequency is trending upward. In 2023, price rises mitigated much of the adverse effects stemming from rising claims inflation, higher claims frequency and increased reinsurance costs. Nonetheless, significantly increased losses due to weather-related events have impacted underwriting performance,” analysts added.
Moving forward, Moody’s explained that the solvency positions of Nordic life and non-life insurers remain strong, with solvency II ratios remaining mostly above 200% on average as of Q1’24, with the exception of Swedish life insurers.
The rating agency stated that it expects insurers’ capital management policies to remain broadly unchanged, with Solvency II ratios remaining stable over the outlook period.
Lastly, Moody’s also highlights how European regulators are increasingly scrutinising whether life insurers provide customers with value for money, and how this could wind up putting the industry under pressure to lower fees or modify product designs.
“While the Nordic market relies heavily on unit-linked products, a particular area of regulatory attention, local supervisors have not taken strong action on this front, unlike their French and German counterparts,” analysts said.
Concluding: “We therefore foresee no significant regulatory impact on Nordic life insurers over the outlook period, although regulatory scrutiny of the sector will intensify as demand for cost efficient savings products grows. Regulators may also begin to look more closely at the non-life sector. Nordic insurers will in the mid-term have to adapt to the review of the Solvency II capital regime and the introduction of the Insurance Recovery and Resolution Directive, expected to take effect in 2026.”
The post Moody’s remains stable on Nordic P&C and Life insurance sectors appeared first on ReinsuranceNe.ws.
