Global Insurance Markets: Alive And Kicking - Mario Chakar Associate Director Insurance Ratings
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Global Insurance Markets: Mario Chakar
Associate Director
Alive And Kicking
Insurance Ratings
Dec. 7, 2021
This report does not constitute a rating actionContents
Key Takeaways 3
EMEA Property/Casualty 6
EMEA Life 34
APAC Property/Casualty 54
APAC Life 65
North America Property/Casualty 76
North America Life 79
Latin America Property/Casualty 82
Latin America Life 87
Related Research 91
Analytical Contacts 92
2Key Takeaways
– After a sharp decline in economic output, real GDP is rebounding strongly in 2021. This should continue in 2022,
albeit at a slower rate. Real GDP growth should outpace premium growth in most markets, notably developed ones.
– The recent emergence of the Omicron variant raises concerns around the pace of economic recovery as well as the
performance of capital markets.
– If the uptick in inflation in 2021-2022 proves not to be transitory, it could hurt insurers' profitability, chiefly those
with longer-tail liabilities without the ability to adjust pricing and pass on the increased costs to policyholders.
– Following lockdown-induced improvements in loss ratios last year, we expect property/casualty (P/C) insurers'
technical performance to return to pre-pandemic levels over 2022.
– P/C markets with strong performance typically display characteristics of prudent underwriting with disciplined
pricing, strong distribution channels, and digitization.
– The increased importance and awareness of health and wellbeing following the pandemic should support life and
health premium growth prospects.
– Low interest rates remain a key risk for life insurers, particularly those exposed to high guarantees.
3Global Insurance Outlook | Well Placed For 2022 Challenges
Most Of Our Rated Insurers Benefit From A Stable Outlook
– We continue to maintain a negative outlook on a few sectors,
CW Developing CW Negative Negative Positive Stable including the global reinsurance and Latin American sectors.
0.3% 2.8% – Negative outlooks and negative CreditWatch placements
6.7%
affect a few insurers, in most cases because of M&A-related
4.6% activity, or ongoing capital pressures. Certain issuers also need
to restore satisfactory profitability levels.
Areas We Are Watching With Increased Focus
– The potential impact of inflation on claims cost and reserve
adequacy, especially on longer-tailed lines.
– How intense competition is, and what effect that has on
profitability.
– Increases in asset risk appetite triggered by quantitative
easing measures.
– Exposure to risks from the downgrading of corporates and
banks.
85.5%
– Extent to which increased awareness of insurance can be
CW--CreditWatch. Outlook/CreditWatch distribution as of Nov. 26, 2021. Source: S&P Global Ratings. converted into sales and maintained post pandemic.
4Top Risks For The Global Insurance Sectors
Risk Category Description
Investment performance risk Capturing financial markets risks, including interest rates, mark to market, and asset quality.
Exposure to high-risk assets High-risk assets typically include equities (listed and unlisted), real estate, fixed-income investments or deposits in
institutions that are rated 'BB+' or lower, and unrated bonds and loans.
Country risk Risk factor taking into account considerations such as macroeconomic risk, sovereign rating limitations, geopolitical, and rule
of law risks.
Intense competitive environment Whether the market is concentrated with a few players or contains a high number of smaller ones, an intense competitive
environment could lead to price wars and hurt profitability.
Muted market growth prospects The lack of potential for premium growth in a market, either because it is mature or due to adverse macroeconomic conditions,
with high inflation resulting in near-zero (or negative) real growth.
Weak technical results An industry where technical performance, typically measured by combined ratios (non-life) and return on assets (life) is loss-
making.
Exposure to natural catastrophes Markets with material exposure to climate risk, notably, earthquakes, hurricanes, and other natural disasters.
Litigious legal system A sector where litigation often leads to lengthy court cases, increasing the tail of an insurer's liabilities, and consequently,
resulting in unpredictable claims settlements.
Government and regulatory policy Markets exposed to changes in government or regulatory policies, often resulting in material impacts on insurers' business
risks models and/or profitability.
Foreign exchange impact Reflects the impact foreign exchange risks could have on profitability.
Other Risk classification that does not fit any of the 10 categories described above.
5EMEA P/C
Kuwait
Israel
Qatar
UAE
Very low risk
Low risk
Intermediate risk
Moderately high risk
High risk
Very high riskAustria P/C | Sound Profitability Somewhat Offset By Limited
Growth Opportunities
GPW Growth Mainly From Premium Adjustments And Some
Selected Growth Opportunities
6%
Real GPW growth Real GDP growth Nominal GPW growth
– Sound underwriting profitability, despite pandemic-related
4% disruption.
2% – The mature stage of the market offers relatively limited room
0%
for growth, though there are some opportunities across
-2%
certain lines of business, such as cyber and legal expenses.
-4%
-6% – Going forward, we expect combined ratios to normalize from
-8% extraordinary levels in 2020 and 2021. Indeed, combined
2019 2020 2021f 2022f
ratios are likely to remain in line with the five-year average of
93%-95% over the next two years.
Strong Returns And Technical Performance
– Mild improvement in profitability in 2020 mainly reflects the
14%
ROE (left scale) Net combined ratio (right scale)
96%
motor and accident lines, which benefitted from lockdown
12% 95%
measures. This was partly offset by business interruption
10% 94%
and credit insurance claims.
8% 93% – Moderate exposure to natural catastrophes, although
6% 92% adequate pricing and reinsurance cover key risk exposures.
4% 91%
2% 90%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
7Belgium P/C | Underwriting Discipline, With Some Exposure To
Weather Events
GPW Growth To Remain Flat In Real Terms
8%
Real GPW growth Real GDP growth Nominal GPW growth
– Generally stable loss ratios, supported by underwriting
6% discipline and comprehensive reinsurance cover.
4%
2%
– Flood events from the summer of 2021 expected to cost the
0% industry around €2.1 billion in claims, pressuring technical
-2% performance.
-4%
-6% – The P/C sector is exposed to winter storms and does not have
-8% a central mechanism in place to cover catastrophic events.
2019 2020 2021f 2022f
– The economic recovery should support mild real premium
Profitability To Remain Stable In The Absence Of Major growth.
Catastrophe Losses
ROE (left scale) Net combined ratio (right scale)
10% 96%
9% 95%
8% 94%
7% 93%
6% 92%
5% 91%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—Forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
8Czech Republic P/C | Profitability Among The Strongest And Most
Stable In Europe
GPW To Develop In Line With GDP, Reflecting Price Increases
Following 2021 Catastrophe Events And General Claims Inflation
15%
Real GPW growth Real GDP growth Nominal GPW growth
– Very profitable activities above the European average, with
limited exposure to pandemic-affected lines, further boosted
10%
by lower loss experience in motor.
5%
– Large storm events of summer 2021 expected to cost the
0% industry around €225 million (CZK5.6 billion) in claims, but to
-5% be largely absorbed by good reinsurance protection.
-10% – We expect the sector to continue to display generally prudent
2019 2020 2021f 2022f
underwriting, maintaining stable technical profitability in
Medium-Term Profitability To Remain Strong, Despite A Heavy 2022 and remaining above the European average.
Catastrophes Season In 2021 – Changes in 2020 reserve taxation did not immediately affect
ROE (left scale) Net combined ratio (right scale)
30% 94%
sector performance; however, insurers' future underwriting
results could become more volatile.
26% 93%
– Asset risk remains relatively low as the insurers
22% 92%
predominantly invest in local government securities.
18% 91%
– Although the market is relatively concentrated, it can observe
14% 90%
intense price competition in obligatory motor insurance,
10% 89% while property lines are generally stable and very profitable.
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. CZK—Czech koruna. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P
Global Ratings. Czech insurers are composite players, as such ROE reflects combined life and non-life operations.
9Denmark P/C | Among The Strongest Performers Globally
Significant Premium Growth In 2020 Despite The Pandemic
8%
Real GPW growth Real GDP growth Nominal GPW growth
– Despite weaker economic conditions in Denmark owing to the
6%
COVID-19 outbreak, the sector experienced very strong
premium growth, notably in motor, accident, and health
4%
insurance.
2%
0% – Lower interest rates still weigh on investment income,
-2%
although underwriting results will continue to result in strong
-4%
profitability.
2019 2020 2021f 2022f
– Moderate exposure to natural catastrophes remains the
Stable And Strong Profitability Likely To Remain A Key primary cause of large claims and loss volatility.
Characteristic Of The Market – Certain long-tailed lines of business, such as workers'
20%
ROE (left scale) Net combined ratio (right scale)
89%
compensation, could result in some volatility, notably in the
event of legislation changes.
15% 88%
10% 87%
5% 86%
0% 85%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
10Finland P/C | Robust Profitability, Although Not As Strong As Its
Nordic Peers
GPW Growth To Be More In Line With GDP
8%
Real GPW growth Real GDP growth Nominal GPW growth
– The sector enjoys robust profitability, mainly due to lower
6%
claims frequency in light of the COVID-19 pandemic and
healthy investment results.
4%
2% – We expect ROE will return to pre-pandemic levels in 2021-
0% 2022.
-2% – Exposure to catastrophe risk is lower than in Nordic
-4% countries, although some volatility could arise from the high
2019 2020 2021f 2022f
proportion of long-tailed workers' compensation and motor
business.
Strong Cost Efficiency Contributes To The Sector's Profitability
ROE (left scale) Net combined ratio (right scale)
20% 110%
15% 105%
10% 100%
5% 95%
0% 90%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
11France P/C | Improved Technical Profitability, But Strong COVID-19
Impact
We Expect Premium Growth To Stagnate In Light Of The Current
Uncertain Environment
8%
Real GPW growth Real GDP growth Nominal GPW growth
– We project a growth rate below the historical average to
reflect the difficult economic environment.
4%
– We expect the sector to maintain its underwriting discipline,
0%
but unfavorable economic conditions and pandemic-related
-4% losses could lead to an overall 5% negative impact on the
-8% combined ratio.
-12% – While the calendar year combined ratio appears weaker than
2019 2020 2021f 2022f
peers, we believe this reflects a generally prudent reserving
policy, as indicated by technical reserve redundancies.
We Expect The Sector To Maintain Its Underwriting Discipline
– Exposure to natural catastrophes and man-made events is
ROE (left scale) Net combined ratio (right scale)
9% 101%
materially mitigated by the combination of state schemes
and privately placed reinsurance.
8% 100%
7% 99%
6% 98%
5% 97%
4% 96%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
12Germany P/C | Healthy Technical Performance Despite Weather
Events In 2021
The Economic Recovery Should Support GPW Growth
6%
Real GPW growth Real GDP growth Nominal GPW growth
– German insurers face much higher natural catastrophe
4%
losses this year, mainly driven by the low-pressure system
"Bernd".
2%
0% – Some of the worst weather in decades hit Germany in June
-2% and July, and we believe P/C insurers are likely to register very
-4%
high natural catastrophe losses, although the magnitude is
-6%
still unclear as the disaster unfolds.
2019 2020 2021f 2022f
– If natural catastrophe losses reach €10 billion for 2021, we
expect the gross combined ratio to increase to about 102%.
Steady Technical Profitability Fuelled By Underwriting Discipline
– Ongoing pricing discipline should continue to offset low
ROE (left scale) Net combined ratio (right scale)
16% 101% interest rates in the medium term.
14% 99% – Lower claims amid limited economic activity in 2020 more
12% 97% than offset COVID-19-related claims from business
interruption, event cancellation, and credit insurance.
10% 95%
8% 93%
6% 91%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
13Ireland P/C | Improved Underwriting Discipline, Offset By COVID-19-
Related Claims
Premium Growth To Moderate Following A Recent Period Of Strong
Growth
7%
Real GPW growth Real GDP growth Nominal GPW growth
– After a period of severe claims inflation, underwriting
6%
performance has improved in recent years thanks to major
5% rate hikes in key lines of business.
4%
– The sector was exposed to COVID-19 claims in 2020, notably
3%
relating to business interruption (BI). We expect underwriting
2%
performance in the P/C industry to remain constrained in
1%
0%
2021, as litigation on COVID-19-related BI claims from last
2019 2020 2021f 2022f year remains ongoing.
– We expect underwriting performance in 2022 to converge to
COVID-19-Related Claims To Depress Net Combined Ratios pre-pandemic levels.
100%
– Ireland has a litigious market that is prone to unpredictable
98% claims settlement, which results in some product risk.
96%
– The sector's exposure to natural catastrophe events, such as
94%
flooding and freezing, is unlikely to result in material volatility
92% because these risks are adequately reinsured.
90%
88%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. The forecast 2022 combined ratio of
96% represents the midpoint of our forecast range 95%-97%. Source: S&P Global Ratings.
14Israel P/C | Modest Premium Growth Potential Amid Challenging
Operating Environment
Limited Premium Growth Prospects Through To 2022
6%
Real GPW growth Real GDP growth Nominal GPW growth
– COVID-19-induced lockdowns and lower claims frequency
resulted in enhanced technical results in 2020. We expect
4%
performance in 2021-2022 to normalize, amid intensifying
2% competition.
0% – Excluding the 2021 rebound in premium growth, we expect
-2% that fierce competition, especially in motor and property, will
-4%
continue to affect pricing, limiting premium growth prospects.
2019 2020 2021f 2022f
– Investment income remains an essential component of the
Underwriting Profitability To Somewhat Deteriorate Over 2021- Israeli P/C sector's profitability, often compensating for the
2022 technical losses from long-tail liabilities lines.
15%
ROE (left scale) Net combined ratio (right scale)
105%
– Long-tail policies represent around 40% of premiums,
exposing Israeli insurers to some product risk, notably
100%
13% relating to unpredictable settlements and interest rates
95% movements.
11%
90%
9%
85%
7% 80%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
15Italy P/C | Disciplined Underwriting Supports Stable Operating
Performance
We Expect Premium Growth Will Roughly Correlate With GDP
10%
Real GPW growth Real GDP growth Nominal GPW growth
– We project some deterioration in combined ratios over 2021-
2022, following one-off benefits from lockdown measures
5% last year. Combined ratios should remain below 95%, however.
0% – Non-motor performance continues to enhance the sector's
profitability.
-5%
– Insurers' pricing policies have become much more sensitive
-10% to policyholders' risk profiles and behaviors, minimizing
2019 2020 2021f 2022f
product risk.
Sound Profitability Likely To Persist Through To 2022 – The P/C sector has low exposure to natural catastrophe risk,
as households are generally not covered for these risks.
ROE (left scale) Net combined ratio (right scale)
12% 94% – Unlike in France or Spain, for example, Italy does not have a
10% 93% government-sponsored scheme to cover those risks in an
8% 92% affordable way.
6% 91%
4% 90%
2% 89%
0% 88%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
16Kazakhstan P/C | Strong Profitability Despite Increasing Combined
Ratio
We Expect Double-Digit GPW Growth in 2021
25%
Real GPW growth Real GDP growth Nominal GPW growth
– We expect double-digit GPW growth in 2021, compensating
20%
for the stagnation during the pandemic in 2020. That said, P/C
insurance penetration will remain low in Kazakhstan in view of
15%
the population's still-evolving financial literacy.
10%
5% – Although performance will likely remain strong overall, we
0%
expect an increase in combined ratios due to currency
-5%
depreciation, which results in increases in spare car part
2019 2020 2021f 2022f costs.
Kazakh P/C Insurers' Profitability To Remain Strong Over 2021- – Solid investment income on the back of increasing interest
2022 rates in Kazakhstan will likely support local insurers'
ROE (left scale) Net combined ratio (right scale) profitability.
16% 104%
15% 100%
– While Kazakhstan is prone to natural catastrophes, notably
14% 96%
earthquakes, the penetration and retention level on those
risks is low, limiting the potential for earnings volatility.
13% 92%
12% 88%
11% 84%
10% 80%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
17Kuwait P/C | Among The Fastest Growing Markets In The Region,
Although Macroeconomic Uncertainties Could Slow The Pace
The Underdeveloped Sector Offers Good Opportunities For
Premium Growth
10%
Real GPW growth Real GDP growth Nominal GPW growth
– Upcoming infrastructure projects, as well as various
government initiatives, notably in health insurance, should
5% increase demand for insurance, supporting premium growth.
0% – Technical performance benefits from lucrative commissions
received from ceding big-ticket commercial business to the
-5%
international markets.
-10% – While investment income enhances ROE, the high exposure to
2019 2020 2021f 2022f
risky assets such as equities and real estate, is a source of
earnings volatility.
We Expect Profitability To Remain Relatively Stable
– We view Kuwait's institutional framework as relatively weak,
10%
ROE (left scale) Net combined ratio (right scale)
99%
but the recent introduction of a new insurance law should
strengthen the market's discipline.
9% 98%
– Insurance products in Kuwait are generally short-tail and have
8% 97% predictable claims settlements, which are resolved within 12
months of being reported. Hence, product risk is low.
7% 96%
6% 95%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
18Netherlands P/C | Improving Profitability, Though Still Weaker Than
Peers
Real GPW Growth To Correlate With GDP Growth
8%
Real GPW growth Real GDP growth Nominal GPW growth
– Following rate hikes that supported premium growth, this will
6% moderate to become more in line with GDP.
4% – The market has been experiencing hardening rates, notably in
2%
motor, property, and accident lines, but performance remains
0%
relatively weaker than the European average.
-2%
-4% – We think that the market will maintain its underwriting
-6% discipline in future due to ongoing consolidation.
2019 2020 2021f 2022f
– The Netherlands is exposed to some physical risks such as
Improved Pricing And Lower Claims, Particularly In 2020, Improved hail and storm winds, but insurers typically budget for them. In
Combined Ratios addition, due to the low-lying nature of the country, flood risk
104%
occurs but few companies offer it. Hence, the P/C sector's
102%
profitability is unlikely to be materially affected by these
100%
risks.
98%
96%
94%
92%
90%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
19Norway P/C | Among The Strongest Performers Globally, Though
Insurers Have Appetite For High-Risk Assets
Favorable Growth, Expected To Be In Line With GDP
8%
Real GPW growth Real GDP growth Nominal GPW growth
– Economic growth, low unemployment rates, and an expansive
6%
fiscal rule help sustain a positive operating environment to
generate profitable insurance growth.
4%
2% – The Norwegian P/C market has consistently outperformed the
0% majority of European (and global) non-life sectors in terms of
-2%
underwriting profitability. We expect this to continue into 2022.
-4% – Norwegian players have a relatively high appetite for equity
2019 2020 2021f 2022f
investments. About one-third of investments are held in
equities or funds, potentially exposing insurers to some
Profitability Will Remain Strong Over 2021-2022 earnings volatility.
ROE (left scale) Net combined ratio (right scale)
25% 94%
– Some exposure to natural catastrophes (storms and
flooding), though these are mitigated through the Norwegian
20% 93%
Natural Perils Pool and the purchase of extensive reinsurance.
15% 92%
10% 91%
5% 90%
0% 89%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
20Poland P/C | Solid Growth Prospects Support Stable Profitability
Real GPW Growth In Line With Economic Development And
Following Some Claims Inflation
12%
Real GPW growth Real GDP growth Nominal GPW growth
– Stable medium-term profitability despite an expected
9%
increase in competition, continued claims inflation, and rising
operating costs.
6%
3% – Weaker performance in 2020 mainly due to higher capital
0% base and regulator's request to cancel dividend payments in
-3%
2020. In addition, market volatility and low interest rates
-6%
reduced investment incomes below 2019 levels.
2019 2020 2021f 2022f
– Market leader PZU S.A. materially outperforms the sector.
Profitability To Remain Stable In 2021-2022, With Limited Impact Excluding PZU, sector performance would be materially
From COVID-19 Claims weaker and more volatile.
18%
ROE (left scale) Net combined ratio (right scale)
96%
– Motor represents around 55% of total GPW. We have seen a
15% 95%
rebound in the sale of new and used cars in 2021, though a
12% 94%
slowdown could pressure volumes and profitability.
9% 93% – Still-evolving legislative practices affect the predictability of
6% 92% claims settlements and can trigger some volatility in returns.
3% 91%
0% 90%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
21Portugal P/C | Growing Economy To Provide Opportunities For
Profitable Premium Growth
We Expect Premium Growth To Continue, Albeit At A Slower Pace
10%
Real GPW growth Real GDP growth Nominal GPW growth
– We see the Portuguese P/C sector having favorable growth
prospects on account of increasing household and corporate
5% confidence in the economy.
0% – Portugal's P/C sector has structurally improved its
profitability and we expect it to sustain it at this level over the
-5%
next two years.
-10% – Workers' compensation, which was the least profitable line,
2019 2020 2021f 2022f
has significantly improved its combined ratios, thanks to rate
improvements.
Profitability To Stabilize At Current Favorable Levels
– Portugal is exposed to low frequency, high severity-type
14%
ROE (left scale) Net combined ratio (right scale)
96%
natural disasters such as earthquakes and floods, notably in
the south. However, mitigation strategies limit the potential for
12% 92% earnings volatility.
10% 88%
8% 84%
6% 80%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
22Qatar P/C | Low Product Risk And Relatively High Barriers To Entry,
Offset By Material Exposure To High-Risk Assets
GPW Growth Continues To Outpace GDP Growth
25%
Real GPW growth Real GDP growth Nominal GPW growth
– The P/C industry continues to offer decent growth prospects
20%
in the run up to the FIFA 2022 World Cup.
15% – The introduction of a compulsory medical insurance scheme,
10% likely to start in May 2022, offers material growth
5% opportunities.
0% – Thanks to corrective pricing actions, the net combined ratio
-5% should remain at 98%, or lower, over the next two years.
2019 2020 2021f 2022f
– Qatari insurers' large capital base drives modest ROE levels.
Technical Profitability Has Improved In Recent Years And Is Likely
– Investment portfolio geared toward high-risk assets (equities
To Remain At Current Levels
ROE (left scale) Net combined ratio (right scale)
and real estate) could cause ROE volatility.
6% 104%
5% 102%
4% 100%
3% 98%
2% 96%
1% 94%
0% 92%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
23Russia P/C | Profitability Remains Resilient To Adverse
Macroeconomic Conditions And Competitive Pressures
Limited Real GPW Growth Prospects Over 2021-2022
6%
Real GPW growth Real GDP growth Nominal GPW growth
– Large P/C insurers achieved sound operating performance
and improved credit quality of their investment portfolios.
4%
– We anticipate an increase in competition following
2%
liberalization measures, particularly in the motor segment.
0%
– Expected ROE of around 15% in 2021-2022 is weaker than in
-2%
2020, which notably benefitted from one-off foreign-exchange
-4% gains.
2019 2020 2021f 2022f
– P/C insurers generally benefited from lockdown measures in
Resilient Performance Expected To Continue Amid Economic 2020, since lower motor and medical claims frequency
Rebound improved loss ratios, while COVID-19-related losses were
35%
ROE (left scale) Net combined ratio (right scale)
96%
minimal.
30% 94% – Regulation has become more stringent over the past five
years. On July 1, 2021, the regulator introduced a risk-based
25% 92%
approach for calculating capital requirements in 2021,
20% 90%
similar to Solvency II principles. In our view, insurers are
15% 88% generally well prepared for the new solvency regime,
10% 86%
gradually strengthening their capital buffers.
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
24Saudi Arabia P/C | Low Insurance Penetration And High Competition
Profitable Market With Modest Growth Prospects
12%
Real GPW growth Real GDP growth Nominal GPW growth
– The insurance regulator continues to actively encourage
9%
companies in the sector to merge in order to create a market
with fewer, stronger players.
6%
3% – Several mergers and acquisitions have been initiated over the
0% past few years, with two completing in 2020 and some in
-3%
advanced discussions.
-6% – Prospective premium growth, primarily from mandatory
2019 2020 2021f 2022f
medical cover for Hajj and Umrah pilgrims, rate increases in
commercial lines, and authorities' efforts to reduce the
Operating Performance In The Sector Likely To Remain Stable number of uninsured cars.
10%
ROE (left scale) Net combined ratio (right scale)
98%
– The government covered most of the cost of COVID-19-related
9% 97%
medical care, which improved insurers' 2020 underwriting
8% 96%
performance.
7% 95% – About 80% of insurance policies sold in Saudi Arabia relate to
6% 94% motor and medical cover. This means that losses are relatively
5% 93% predictable and have a short tail.
4% 92%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
25Slovenia P/C | Strong And Sustainable Performance On The Back Of
Continued Prudent Underwriting
Real GPW Growth To Return To The Level Of Real GDP Growth By
2022
9%
Real GPW growth Real GDP growth Nominal GPW growth – GPW growth in 2021 could be limited by some premium
returns in the health line, before improving in 2022 in line
6%
with GDP.
3%
0% – The sector was resilient in 2020 and in first-half 2021, with no
-3%
material negative impact from COVID-19. This was mainly due
-6%
to P/C insurers' very limited exposure to the most affected
-9%
lines, and some frequency benefit in motor and health lines.
2019 2020 2021f 2022f
– Continued robust capitalization and reserving position of
Prudent Underwriting To Support Strong And Stable Profitability rated players, supported by the regulator's request to halt
Through To 2022 dividends in 2020.
14%
ROE (left scale) Net combined ratio (right scale)
95%
– Despite exposure to natural catastrophes, access to
reinsurance capacity internationally limits this.
12% 94% – We consider that any legislative changes that affect the
health insurance line are unlikely in 2021-2022. In the longer
10% 93% term, the future of the line remains uncertain.
8% 92%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
26South Africa P/C | Resilient Profitability, Though The Macroeconomic
Environment Is A Challenge
Constrained Economic Growth Has Hampered The Potential For
Broader Insurable Risks
10%
Real GPW growth Real GDP growth Nominal GPW growth – The P/C sector continues to demonstrate resilient current,
and prospective, profitability. We expect profitability levels to
5% improve in 2021 from 2020, following large, one-off losses
relating to business interruption claims.
0%
– The July riots will have a limited effect on insurers' earnings,
-5% since riots and political violence policies are generally covered
-10%
by Sasria.
2019 2020 2021f 2022f
– Unlike most emerging market insurers, insurance companies
Profitability To Improve In 2021 Onwards, Following One-Off in South Africa enjoy a diversified and active capital market,
Pandemic-Related Large Losses In 2020 offering investment in a variety of assets. That said, these are
ROE (left scale) Net combined ratio (right scale) largely in local currency and concentrated domestically,
20% 98%
resulting in relatively low credit quality and heightened credit
17% 97% risk.
14% 96% – Product risks arise from natural catastrophe exposures
11% 95% relating to hail, flooding, and other weather-related events,
8% 94%
and investment constraints due to low credit quality.
5% 93%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Sasria is a South Africa-based state-
owned insurance company providing coverage for damage caused by special risks such as politically motivated malicious acts, riots, strikes, terrorism and public disorders. Source: S&P Global Ratings.
27Spain P/C | One Of The Most Profitable In Europe Despite Declining
Fixed-Income Investment Returns
The Economic Recovery May Offer Some Opportunities For
Premium Growth
10%
Real GPW growth Real GDP growth Nominal GPW growth – Non-life activities have been very profitable, both while the
economy was supportive, and when the economic situation
5%
was troubled, such as during the pandemic in 2020.
0%
– Claims display little volatility, lowering product risk. We
-5% attribute this stability to the Insurance Compensation
-10% Consortium and the Baremo.
-15% – Barriers to entry remain high, protecting the profitability of
2019 2020 2021f 2022f
existing players.
We Expect The Sector To Sustain Its Sound Technical Performance – Prevailing low interest rates and high volatility in the equity
markets have been detrimental to investment yields and will
12%
ROE (left scale) Net combined ratio (right scale)
94%
remain so.
– Industrial lines showcase weak profitability, despite some
11% 93%
signs of improvements since 2019.
10% 92%
9% 91%
8% 90%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. The Insurance Compensation
Consortium (Consorcio de Compensacion de Seguros) is a public entity that mitigates spikes in claims arising from extraordinary events. The Baremo helps participants predict claim settlements for bodily injuries arising from
motor accidents. Source: S&P Global Ratings.
28Sweden P/C | Highly Profitable Market Despite Some Product Risk
And Exposure To Equities
The Sector Continued To Grow Despite Recessionary Conditions
6%
Real GPW growth Real GDP growth Nominal GPW growth – The sector demonstrates strong profitability levels,
supported by robust technical performance that offsets the
4%
low interest rate environment.
2%
– Some exposure to natural catastrophes (including storms,
0% floods, and harsh winters) has resulted in large claims, but the
-2% market's overall profitability helps offset this.
-4% – Sizable long-tail risks relating to motor claims (about 37% of
2019 2020 2021f 2022f
market premium in 2019) expose the sector to claims inflation
and legislative changes.
Strong Profitability Likely To Carry Through To 2022
– Higher appetite for equity investments than peers in other
16%
ROE (left scale) Net combined ratio (right scale)
92%
European countries increases earnings volatility and market
risk.
12% 90%
– In line with Nordic peers, the sector is highly cost effective,
8% 88% supporting technical performance.
4% 86%
0% 84%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
29Switzerland P/C | Among The Least Risky Sectors Globally
The Mature Market Still Offers Some Opportunities For GPW
Growth
Real GPW growth Real GDP growth Nominal GPW growth – Swiss authorities' supportive policy measures should prevent
4%
longer-lasting damage to the economy's productive capacity.
2% Hence, we believe there is profitable GPW growth potential.
– Although it remains strong, profitability was somewhat
0%
affected by higher-than-average claims in 2020 as a result of
-2% COVID-19 losses, as well as high natural catastrophe losses
in 2021.
-4%
2019 2020 2021f 2022f – Disciplined underwriting, strict claims management, and less
fierce price competition are all important factors that
Sustainably Strong Returns With Relatively Little Volatility contribute to the sector's strong profitability.
25%
ROE (left scale) Net combined ratio (right scale)
95%
– The market has a relatively high exposure to investment
properties, which could come under pressure considering the
20% 93% ongoing environment.
15% 91%
– The sector benefits from significant buffers offered by a state-
driven mandatory insurance coverage program for natural
10% 89% disasters, which limits product risk.
5% 87%
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
30Turkey P/C | Risks Arise From Challenging Economic And
Institutional Environments, With Poor Technical Performance
The Sector Continues To Develop, Presenting Opportunities For
GPW Growth
30%
Real GPW growth Real GDP growth Nominal GPW growth – Unpredictable policy changes could lead to volatility, and
consequently hinder profitability prospects for insurers.
25%
20% – The insurance sector has material exposure to local banks,
15%
significantly straining insurers' asset credit quality. Yet,
10%
companies earn material investment income from their
5%
deposits, offsetting the technical losses.
0% – With motor insurance representing about one-half of non-life
2019 2020 2021f 2022f
premiums, its poor performance, particularly third-party
Technical Performance To Revert To Poor Pre-Pandemic Levels In liability, is a key driver of the sector's results. In addition, local
2021-2022 currency devaluation hinders performance by increasing the
ROE (left scale) Net combined ratio (right scale) cost of spare car parts, and consequently claims.
25% 108%
– Unpredictable claims settlements could materially affect
22% 106%
insurers' results. In addition, Turkey is one of the world's most
19% 104% earthquake-prone countries, increasing product risk.
16% 102%
– Increased penetration in earthquake protection boosts
13% 100% insurers' profitability in catastrophe-benign years. However,
10% 98%
heightened exposure to this type of cover exposes insurers to
2019 2020 2021f 2022f major potential losses.
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we
used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
31United Arab Emirates P/C | Very Profitable Underwriting, Despite
Fierce Competition
We Anticipate Satisfactory Growth For the P/C Sector
6%
Real GPW growth Real GDP growth Nominal GPW growth – We expect GWP growth to be modest in 2021. Ongoing
infrastructure spend and an increase in visitor numbers will
4%
be the main drivers of GWP in 2021 and 2022, in addition to a
2%
successful vaccine rollout program and the delayed Expo
0%
2020.
-2%
-4%
– Intense competition, as well as more frequent motor claims
-6%
and the resumption of non-essential medical treatments
2019 2020 2021f 2022f that were paused during the movement restrictions in 2020,
will likely lead to a slight weakening in technical performance
The Sector Benefits From Very Profitable Underwriting That We
in 2021 and 2022.
Expect Will Continue
ROE (left scale) Net combined ratio (right scale) – Roughly 50% of total investments are allocated in equity and
11% 93%
real estate, which could introduce some earnings volatility.
10% 92%
– Reinsurance rates for energy, property, and liability risk have
9% 91% increased substantially in recent years, partly following
8% 90% global trends, as well as a reduction in capacity and some
7% 89%
larger property and fire claims. However, international
reinsurers still provide adequate capacity for all major risks,
6% 88%
2019 2020 2021f 2022f
and we therefore do not consider product risk to be elevated.
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. Abu Dhabi used as proxy for the UAE's macroeconomic indicators. For inflation, we used S&P Global Ratings' assumptions for
consumer price index growth. Source: S&P Global Ratings.
32U.K. P/C | Satisfactory Profitability Amid A Litigious Legal System
The Mature Stage Of The Industry Results In Limited Real GPW
Growth Prospects
10%
Real GPW growth Real GDP growth Nominal GPW growth – COVID-19 has moderately affected the P/C market, with
business interruption (BI) claims hitting the commercial small
5%
and midsize enterprise (SME) insurance market. Personal
0% lines motor insurers are benefiting from fewer claims.
-5% – The industry suffered a blow to its image when many insurers
-10% refuted COVID-19 related BI claims from SMEs.
-15% – The U.K.'s increasingly litigious culture and volatility in bodily
2019 2020 2021f 2022f
injury claims settlements have brought instability to results.
We Expect Stable, But Unspectacular Profitability For U.K. – The government-supported Flood Re scheme significantly
Insurers Over 2021-2022 reduces the exposure of U.K. insurers to flood risk.
ROE (left scale) Net combined ratio (right scale)
11% 99% – The 2021 winter season saw limited storms and flooding, but
the U.K. experienced some flash flooding in the summer in
10% 98% London. Total weather-related claims in 2021 are likely to be
lower than in 2020, however.
9% 97% – The dominance of price comparison websites as the main
retail distribution channel continues to drive fierce
8% 96% competition.
2019 2020 2021f 2022f
P/C—property/casualty. GPW—gross premiums written. ROE—return on equity. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
33EMEA Life
Israel
Very low risk
Low risk
Intermediate risk
Moderately high risk
High risk
Very high riskAustria Life | Market Expected To Shrink But Remain Profitable
Real Premium Decline Due To Muted Demand For Life Products
Real GPW growth Real GDP growth Nominal GPW growth
6% – The sector's stable profitability is comparatively weaker than
3%
its EU peers.
0% – Increased product risks stemming from guarantees in the
-3%
back books and asset-liability mismatches, together with a
decline in interest yields, could pressure bottom-line results
-6%
going forward.
-9%
2019 2020 2021f 2022f – Higher expense ratios for Austrian insurers could cause ROE
to decline further over 2021-2023.
Relatively Stable But Low Profit Margins Result In Modest
– Ongoing economic pressure from the pandemic, combined
Returns
ROE (left scale) ROA (right scale) with weak demand, will lead to a decline in the market's GPW.
5% 1.0%
4% 0.8%
3% 0.6%
2% 0.4%
1% 0.2%
0% 0.0%
2019 2020 2021f 2022f
GPW—gross premiums written. ROE—return on equity. ROA—return on assets. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
35Belgium Life | Wealthy And Robust Economy To Support Premium
Growth
GPW Growth Expected To Correlate With Real GDP Growth
Real GPW growth Real GDP growth Nominal GPW growth
10% – Despite features and mechanisms protecting life insurers'
5% balance sheets from interest rate risk, the relatively higher
0%
guaranteed rates make the sector structurally more
vulnerable to low interest rates than some neighboring
-5%
markets.
-10%
– A decline in average guarantees and reduced requirements
-15%
2019 2020 2021f 2022f for additional provisions in the back book result in improved
and more stable profitability metrics.
Returns To Remain Relatively Constrained Due To The Low Interest
Rate Environment – After a drop in premiums in 2020 due to the COVID‐19
9.0%
ROE (left scale) ROA (right scale)
1.2%
pandemic, we expect life insurance premium growth will
8.5% 1.0%
recover over 2021‐2022, in line with GDP.
8.0% 0.8%
7.5% 0.6%
7.0% 0.4%
6.5% 0.2%
6.0% 0.0%
2019 2020 2021f 2022f
GPW—gross premiums written. ROE—return on equity. ROA—return on assets. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
36Czech Republic Life | Technical Profitability Remains One Of The
Strongest In Europe
Premium Growth Remains Weak Despite Macroeconomic
Recovery
Real GPW growth Real GDP growth Nominal GPW growth
6% – Life activities have been very profitable, both while the
4% economy was supportive, and when troubled, despite COVID-
2%
19.
0%
-2% – Because risk protection and unit-linked products dominate
-4%
the sector, the market has comparably lower exposure to
-6%
-8%
lower- for-longer interest rates.
2019 2020 2021f 2022f
– Reputational challenges hamper growth in unit-linked
Despite Some Challenges, We Expect Performance To Remain One policies, with life insurance products being less attractive than
Of The Strongest In Europe other investment products. We therefore expect growth to
ROE (left scale) ROA (right scale) remain subdued in 2021-2022.
25% 4.0%
– Because of COVID-19-related measures, some higher
20% 3.5%
mortality, lower investment gains, and higher operational
15% 3.0% costs, we expect profitability in 2021-2022 to remain below
historic highs.
10% 2.5%
– In comparison to EU insurers, the sector's asset portfolio is
5% 2.0%
2019 2020 2021f 2022f
among the most concentrated in local government bonds.
GPW—gross premiums written. ROE—return on equity. ROA—return on assets. f—forecast. For inflation, we
used S&P Global Ratings' assumptions for consumer price index growth. Czech insurers are composite players,
as such ROE reflects combined life and non-life operations. Source: S&P Global Ratings.
37Denmark Life | Weakest Performer Among Nordic Peers
GPW Growth To Outpace Real GDP Growth, Thanks To Recovery In
Disposable Income And Increasing Wealth
Real GPW growth Real GDP growth Nominal GPW growth
6% – Danish life insurers will continue to achieve stable
4% profitability in the long term, supported by high operational
2%
barriers to entry and steady growth prospects.
0% – The traditional guaranteed business, with average guarantees
-2%
of 2.5%, constitutes a material portion of technical
provisions, though this is slightly lower than in Sweden and
-4%
2019 2020 2021f 2022f Finland (3.0%-3.5%).
– Relatively high appetite for high-risk assets such as equities,
Lower Profitability Relative To Nordic Peers
which account for over 30% of total invested assets.
ROE ROA
10% 1.0% – High cost efficiency, good distribution channels, and strong
8% 0.8% brands are key safeguards against threats from new entrants.
6% 0.6%
4% 0.4%
2% 0.2%
0% 0.0%
2019 2020 2021f 2022f
GPW—gross premiums written. ROE—return on equity. ROA—return on assets. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
38Finland Life | Among The Highest Guarantees In The Back Book
GPW Growth Experienced Material Volatility, But Is Expected To Align
With Real GDP Growth
Real GPW growth Real GDP growth Nominal GPW growth
45% – Premium growth in the sector has historically witnessed high
30% volatility, mainly due to fluctuations in capital redemption
15% products and changes in tax regulations.
0%
– While volatile interest rates and equity markets could
-15%
constrain future profitability, we expect bottom-line results
-30%
to recover in 2021‐2022.
-45%
2019 2020 2021f 2022f
– Potential volatility from investment risk and guaranteed
back book, with high guaranteed rates (around 4%, one of the
Proven Record Of Strong Profitability
highest in Europe). While Finnish insurers are shifting toward
25%
ROE (left scale) ROA (right scale)
1.00%
more capital-light products, it will take some time to reduce
volatility.
20% 0.80%
15% 0.60% – Market concentration and controlled distribution channels
10% 0.40% create high operational barriers to entry.
5% 0.20%
0% 0.00%
2019 2020 2021f 2022f
GPW—gross premiums written. ROE—return on equity. ROA—return on assets. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
39France Life | Growth And Profits To Recover Following COVID-19
Impact
Real GPW Growth Is Expected To Recover To Near 2% Over 2021-
2022
Real GPW growth Real GDP growth Nominal GPW growth
10% – The French life insurance sector benefits from a diversified
5% economy, although growth opportunities and profitability were
0%
hit hard by COVID-19, as well as the prolonged low interest rate
environment.
-5%
-10%
– Because of lower crediting rates for policyholders and an
increasing share of higher-margin unit-linked and protection-
-15%
2019 2020 2021f 2022f type products, French insurers should sustain satisfactory
profitability through to 2022.
Stable Profitability Owing To Favorable Product Mix – The French life insurance sector's capacity to sustainably
10%
ROE (left scale) ROA (right scale)
0.6%
generate capital buffers makes it more resilient to low
9% 0.5%
interest rates than peer countries.
8% 0.4% – High household savings, tax advantages of life products
7% 0.3% versus other savings vehicles, and the introduction of a new
6% 0.2% pension product support premium growth.
5% 0.1%
4% 0.0%
2019 2020 2021f 2022f
GPW—gross premiums written. ROE—return on equity. ROA—return on assets. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
40Germany Life | Stable Profitability Amid Flat Premium Growth
The Highly Mature Nature Of The Market Offers Limited Growth
Opportunities
Real GPW growth Real GDP growth Nominal GPW growth
15% – The competitive nature of the market and the ongoing low
10%
interest rate environment constrain prospective profitability
to pre-pandemic levels, which is weaker than in Switzerland.
5%
0%
– We consider ROE to be inflated because of the German life
insurance sector's significant reliance on policyholder capital
-5%
rather than solely on shareholders' funds. In addition,
-10%
2019 2020 2021f 2022f
continuous realized gains from bonds to finance the
additional reserving requirement inflate ROA.
Profitability To Remain In Line With Pre-Pandemic Levels – High levels of guarantees in the back book and low yields
14%
ROE (left scale) ROA (right scale)
1.40%
erode the spread between investment income and guaranteed
rates, resulting in product risk.
12% 1.30%
10% 1.20%
– Changes in insurers' product portfolios and customer
demands leave modest scope for premium growth. Due to
8% 1.10%
rising inflation, we expect real premiums to stagnate in 2022.
6% 1.00%
4% 0.90%
2019 2020 2021f 2022f
GPW—gross premiums written. ROE—return on equity. ROA—return on assets. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
41Israel Life | Sector Benefits From Robust Market Growth Prospects
Premium Growth Expected To Correlate With The Israeli Economy
Real GPW growth Real GDP growth Nominal GPW growth
8% – Israel's rapid economic recovery should support premium
6% growth and deposit flows into the life insurance sector and
4% long-term savings activity.
2%
– Growth in long-term savings premiums and pension and
0%
provident funds will continue to recover in 2022 but will lag
-2%
the industry's strong historic growth rate.
-4%
2019 2020 2021f 2022f
– Profitability remains volatile and highly dependent on the
performance of the capital markets, mainly due to the large
Profitability To Remain Relatively Stable Through To 2022 portion of products with variable fee mechanisms.
ROE (left scale) ROA (right scale)
15% 1.10% – Regulatory change to LAT calculation reduces the sensitivity
13% 0.70%
of the sector's accounting profitability to risk-free yield curve
fluctuation. However, the low interest rate environment will
11% 0.30% drag on profitability, mainly through long-term health care
9% -0.10%
reserves adjustments.
7% -0.50%
2019 2020 2021f 2022f
GPW—gross premiums written. ROE—return on equity. ROA—return on assets. LAT—Liability adequacy test. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P
Global Ratings.
42Italy Life | Favorable Industry Characteristics, Notably Decreasing
Guaranteed Rates And High Penetration
Real GPW Growth To Roughly Correlate With Italian Real GDP
Growth
Real GPW growth Real GDP growth Nominal GPW growth – Despite the shock of the pandemic, the sector's growth
10%
prospects remain favorable, driven by the attractiveness of
5% returns on life insurance and the perceived safety compared to
other investments.
0%
– In the current ultra-low interest rate environment, Italian
-5%
insurers benefit from the higher yield on Italian government
-10% bonds compared with other developed EU governments.
2019 2020 2021f 2022f
– While enhancing returns, the high exposure to Italian
Profitability Metrics To Stabilize Below 2019 Records, Caused By
Spread Volatility On Government Bonds government bonds (just over 40%) increases the volatility of
ROE (left scale) ROA (right scale)
profitability metrics and solvency ratios.
16% 1.20%
– Life policies in Italy continue to display higher structural
14% 1.00%
surrender rates than in other European markets, but the trend
12% 0.80%
shows a progressive decline that continued throughout the
10% 0.60%
8% 0.40%
recent uncertain economic environment.
6% 0.20%
4% 0.00%
2019 2020 2021f 2022f
GPW—gross premiums written. ROE—return on equity. ROA—return on assets. f—forecast. For inflation, we used S&P Global Ratings' assumptions for consumer price index growth. Source: S&P Global Ratings.
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