Dutch insurers achieved solid results in 1H2023 on stable underwriting and better investment results, and maintained their very strong Solvency II ratios, Fitch Ratings says.
Dutch insurers have managed to compensate the effect of high inflation in core insurance lines through price increases and achieved broadly stable underwriting results in 1H2023, while the disinflationary trend reduces pressure on insurance premium rates and costs.
The deteriorating outlook reflects expectation that Dutch insurers will face more challenging and more uncertain operating conditions in 2023 as downside risks and headwinds increase.
Inflationary pressure on non-life claims and general operating expenses, and the impact of weaker economic conditions on business volumes and investments are among the main factors driving the deteriorating outlook.
The greater stability of financial markets in 1H2023 and slightly lower long-term interest rates supported insurers’ investment results.
The development of leading Dutch insurers’ SII ratios were mixed, but they remained very strong at end-1H2023.
Early, Fitch Ratings has assigned a deteriorating outlook to the Dutch insurance sector for 2023. The sector outlook, which had been neutral, is an indication of the expected development of the general operating environment for the entire Dutch insurance sector.
Insurance sector outlook assumes economic growth in the Netherlands will weaken in 2023 with GDP growth falling to 0.5% as high energy prices erode households’ disposable incomes and external demand weakens.
The credit quality of fixed-income and mortgage portfolios remained high and stable with very low impairment levels.
Although mortgage delinquency rates could increase in the coming quarters due to economic uncertainty and a softer Dutch housing market, Fitch expects any deterioration to remain limited and not to significantly affect the quality and performance of residential mortgage portfolios.
Investment property portfolio valuations are under pressure from higher interest rates, which resulted in moderate fair-value markdowns for most insurers.
Fitch expects the application of IFRS 17 will not affect insurers’ key performance indicators or strategy, as businesses are already steered on a fair-value basis.
Fitch base this view on insurers’ expected ability to effectively and promptly respond to worsening operating conditions supported by their diverse product and geographic profiles, leading domestic competitive positions, and solid financial profiles.
