Fitch made forecasts for the insurance markets of Europe for 2025
Insurance tariffs in the risk non-life insurance market show different trends in many European markets, according to Fitch’s review of the forecasts of the European insurance sector.
According to Fitch, non-life insurance companies increased rates during the year to compensate for high inflation and reinsurance costs, but the situation regarding the increase in the cost of policies depended on the dynamics of the local market (see Rating of the largest insurance companies in Europe).
Analysts had expected UK and Italian insurers to experience the strongest price rises, with good prospects for a return to profitability thanks to proportional increases in insurance rates expected to outpace inflation.
As a result, this has prompted Fitch to “upgrade” the sector forecasts for the UK market, the London insurance market and the Italian insurance sector in 2024.
Elsewhere in Europe, Fitch said the outlook for the risk insurance sector was “neutral” as the agency believed rate growth was likely to be more restrained by market competition or public pressure.
The outlook for Germany’s insurance sector is also “improving” as recent increases in car and property insurance rates came in well ahead of analysts’ expectations, significantly improving the insurer’s profitability outlook after a loss-making 2023. The agency explained that the full effect of the increase in insurance rates, as well as the softening of inflation and the increase in the yield of fixed income securities, will take time to be reflected in the reports of German insurers, and this will not become clear until 2025.
Even in the UK and Italy, where significant rate increases started earlier, the effect will be felt in the market after 2025 as rates continue to rise in 2024.
Fitch noted that the outlook for the risk insurance sector in France, the Netherlands and Spain remains “neutral”. Rate rises are unlikely to be as strong as in Britain, Italy and Germany due to market competition and public pressure (a feature of the French market) and it will take longer for insurers’ profitability to recover from the impact of rising losses. However, increased political uncertainty in France will have significant credit implications for the domestic insurance market.
The agency expects Europe’s insurers’ core yields to improve modestly this year, thanks to a combination of moderate rate growth, lower inflation and losses, and higher yields in fixed-income securities.