S&P Sees Stable Belgian Insurance Market in 2002

January 22, 2002

Standard & Poor’s has issued a report on the Belgian insurance market which concludes that the basic outlook for the year 2002 is stable, and that the majority of Belgian insurers’ financial strength ratings are unlikely to change over the coming year.

“The outlook reflects the expectation that the current strong growth in the region’s unit-linked life and health insurance markets will continue into 2002, countering the reduced margins and diminishing technical results in its highly mature motor and property markets,” stated Joelle Drut, an associate in S&P’s Financial Services Ratings Group in Paris.

The report considered the problem of poorly performing equity markets and its effect on reserves, and concluded that most Belgian insurers, while they will feel some affects from the diminished returns on equity, will not be severely affected, and “Belgian reserving levels will remain high.”

S&P noted that “Both life and nonlife technical results have also deteriorated since 1999, representing 7.1% of earned premiums in 2000, compared with 10.4% a year earlier.” The biggest problems are the steadily rising loss ratios in motor [auto] insurance portfolios, “to 71.9% in 2000 from 61.2% in 1997,” and “an exceptionally high number of corporate property claims in 2000 compared with 1999. ” This has raised provisions for claims paid by 20% in the past four years, compared with a smaller 13% rise in premium income.

“Insurance market growth in Belgium in 2000, at 18.6%, represented 2.7% of total European premium income and outstripped GDP growth of 4.0%,” S&P’s bulletin stated. It described the overall market as “composite-dominated,” competitive and highly concentrated, “with a large number of foreign insurers (40%). Seventy-six percent of insurance companies are shareholder-owned, with mutuals and cooperatives accounting for the remaining 24%.”

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