Best Report: European Insurers See Improvements; Challenges Remain

October 15, 2013

European non-life and life insurers “are benefitting from a more stable economic environment, although they continue to adjust product offerings and adapt reinsurance purchasing in response to the low-yield environment as they increase their focus on risk management,” according to a new report from A.M. Best Co.

The report, titled “European Insurers Experience Improved Environment, but Challenges Remain“, notes that in the past year, “insurers have taken significant steps to improve their capital positions, including the de-risking of investment portfolios, re-engineering of products and refining of asset-liability matching strategies. Although sentiment in the euro zone has improved and calmness has ensued in 2013 compared with 2012, euro zone countries will continue to face many challenges over the coming months, with many still struggling with high unemployment and stagnant economic growth.”

Best’s report also indicates that “many of the large European insurance groups are reviewing their overall reinsurance purchasing.” Stefan Holzberger, managing director, analytics, said: “European insurers are seeking a more centralized purchasing of reinsurance as they increasingly focus on enterprise risk management (ERM) and attempt to protect consolidated group balance sheets. ERM encourages complex insurance organizations to develop a risk appetite at the group level and manage it holistically through targeted reinsurance protection, rather than on a silo basis.”

Best also pointed out that “as no permanent solution has been established to solve the uncertainties in the euro zone region in 2013,” it has continued “to stress test the balance sheets of rated entities against a renewed deterioration of the investment markets.”

Yvette Essen, director, industry research – Europe and emerging markets, and report author, added: “Although the economic environment has improved for European insurers, A.M. Best expects a period of uncertainty to continue until European Union policymakers find a long-term solution to the euro zone challenges. A.M. Best will, consequently, maintain specific asset risk stress testing of rated entities’ balance sheets for the remainder of 2013 and beyond.”

Source: A.M. Best