Non-life and composite re/insurers in the European market appear to be “categorically bullish” on the outlook for pricing and their prospects for growth, investbank Berenberg said.
Most re/insurers in these markets are expecting rate rises to repeat in 2023, with ranges of 10%+ anticipated in some cases and rates to remain stable at these new higher levels.
Among the main reasons behind these strong increases, Berenberg pointed to the inflation of claims costs, which is particularly strong in motor insurance due to inflation and in reinsurance due to high-cost natural catastrophes such as Hurricane Ian.
Also there continues to be high demand for insurance cover, which reflects increased risk aversion in every link of the value chain, from households seeking better protection to corporates seeking to minimise large claims costs and insurers seeking to minimise earnings volatility from natural catastrophes.
Berenberg notes a rise of claims frequency for large claims, which means that what were before viewed as exceptional large losses are now factored in as part of a normal level of claims.
European life re/insurers have focused mainly on the benefit of rising interest rates, rising reinvestment yields and rising investment income as well as on the potential risks associated with higher interest rates.
These risks include the potential impact of higher interest rates on real estate valuations and the potential risk to solvency from higher government bond spreads.