Retail profit erosion leaves Moody’s negative on European P&C

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Europe’s P&C insurers, who had benefited from lower retail claims during the pandemic, are expected to find difficulty with sluggish price growth and have received a negative outlook from Moody’s.

Analysts see the P&C cycle as one in transition, with claims frequency returning to normal levels and inflation continuing its steep upwards trend.

A further driver can be seen in the lagging of price increases, held back by pandemic-related social and political pressures, as well as intense competition.

And while insurers have revised policy wordings to eliminate pandemic-related business interruption claims, prices continue to rise in the commercial segment.

Additionally, Moody’s notes the rise of natural catastrophe costs, which in turn push up the cost of reinsurance.

In regards to factors which Moody’s says could positively influence the negativity looming over segment, analysts point to price increases in the retail segment, and combined ratios at least in line with pre-pandemic levels.

These factors alongside a stabilisation of net results in the commercial segment and a continued tightening of policy wording, for example to reduce exposure to “silent” cyber risk

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