Non-life insurers still chasing inflation; outlook under ‘bearish tilt’

Non-life insurers may continue to struggle to keep premium growth at a pace to match inflation, the  Fitch ratings agency said in its mid-year review, admitting to a “bearish tilt” for the non-life sector including a deteriorating outlook for several key markets.

“Non-life lines face greater challenges as premiums may not grow sufficiently to compensate for inflationary cost pressures, and normalising claims frequency will put further pressure on earnings,” authors wrote in the mid-year review. “The extent to which non-life insurers can reprice to mitigate some inflation pressures is a key ‘What to Watch’.”

Global reinsurance, the London Market and US P&C are all pinned at ‘neutral’ outlooks, but key markets remain classified as deteriorating, notably Germany, France, Netherlands, the UK company market, US mortgage and US title.

But inflation remains a threat across markets and no region has unassailable margins. “Global Reinsurance and the UK London Market have seen improved underwriting margins and higher yields on investment portfolios,” authors wrote. “However, claims inflation is still high and financial market volatility may increase again leading to investment losses.”

The UK motor market has shown the scale of then risk for pricing to trail inflation and the UK homeowners market has shown how regulatory changes can cap pricing adjustment, authors called out.

Fitch also has its eyes on threats of higher inflation or cat losses in France, German pricing power, the impact of economic slowdown on US mortgage covers and US title insurance.

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