20th September 2023

West and Central Europe-Insurance Newslink Global Trends-Editor's Quarterly Highlights

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West and Central Europe-Editor's highlight extracts from Insurance Newslink articles in the last three months:
-Swiss Re's 2023 SONAR report covers 17 new risks and trends across technological, economic, social and environmental areas.Future threats include malicious attacks on artificial intelligence systems, potential clashes over new trading routes in the Arctic and the dangers of using technology to cool the earth
-The real impact of rising interest rates has yet to be felt across Europe, S&P Global Ratings said in a report- “Credit Conditions Europe Q3 2023: The Slow Burn of Rising(Real) Rates”. 16723 Credit conditions will tighten further as central banks seek to bring inflation under control and restore price stability, which is not expected to happen in the eurozone before 2025. With more restrictive rates, banks will become more risk-averse, funding costs will rise and a focus on credit quality from investors and lenders will increase. In addition, the economic cycle is weakening, which will place more pressure on corporates and households, although the eurozone is not expected to experience a deep recession.
-Lloyd’s announced the winner of its first Lloyd’s Europe Innovation Competition. REOR20 took the prize for its entry on addressing European protection gaps with a breakthrough Artificial Intelligence system for flood risk understanding and mitigation.
-S&P Global Ratings published its latest"EMEA Insurers Ratings List: Financial Strength Ratings And Scores". The report provides the long-term financial strength ratings (FSRs) and ratings scores for all the insurance companies where the main operations are within Europe, the Middle East, and Africa (EMEA) as at 30th June 2023. The scores help S7P Global to assess and opine on credit risk in the sector, and set out its methodology for assessing the credit risk of insurers in "Insurers Rating Methodology," published 1st July 2019, on RatingsDirect.
-Europe's insurance industry expressed some disappointment at the position adopted by the European Parliament's on the Solvency II review. Commenting on the vote, Olav Jones, deputy director general from Insurance Europe, said: “It is overall an improvement on the initial European Commission proposal and Council of the EU text in areas such as capital, volatility and proportionality. However, it is disappointing that some of the original ambitious proposals have been watered down. This is a missed opportunity to allow the insurance industry to deliver even more for consumers and invest even more in Europe. Private investment is vital for Europe to meet its green and digital transformation goals. The trilogues between the three main EU institutions can now begin. A key objective of the review is for insurers to invest more in long-term capital for the economy. The European Commission has also recently committed to simplifying and reducing reporting obligations by 25%. We call for these ambitions to be reflected in the trilogue negotiations and the final text.”
-Munich Re reported that the first half of 2023 is a continuation of the recent run of years with high losses. While the overall losses of $110bn were lower than those in the first half of 2022($!20bn), they were still well above the average for the last ten years($98bn, inflation-adjusted). The same is true for the insured losses of $43bn previous year: $47bn; ten-year average for half-year losses: $34bn). Less than 40% of overall losses in the first half of the year were insured–evidence of the large insurance gap that persists in many countries for multiple natural hazards. Insurers bore around 35% of worldwide losses in terms of the average half-year losses in the period 2013–2022.
-Barents Reinsurance SA selected Moody’s RMS to provide natural catastrophe modelling services for its expanding property portfolio. Data enhancement and modelling will be executed by Moody’s RMS Analytical Services team to cover multiple perils including Europe earthquakes, windstorm, floods, and severe convective storms.
-There was a strong year-on-year recovery in profitability in 1H23 for the four main European reinsurers, Fitch Ratings said in a published report-Fitch commented: "This recovery followed significantly better underwriting margins in both property and casualty(P&C) and life reinsurance as well as a higher investment income among the peer group–Munich Reinsurance Company (Insurer Financial Strength(IFS): AA/Stable), Swiss Reinsurance Company Ltd (IFS: A+/Stable), Hannover Ruck SE(IFS: AA-/Stable) and SCOR SE(IFS: A+/Stable).
-A new Geneva Association report explores the potential benefits offered by decentralised finance and blockchain technology in insurance and the technical, business and regulatory hurdles that must be overcome to harness them.
-Capital dedicated to the global reinsurance sector totalled $709bn at half year 2023, an increase of 13% versus the restated full-year 2022 base.This is according to a Reinsurance Market Report, which tracks the capital and profitability of the global reinsurance industry published by Gallagher Re. The rise in capital was due to strong investment performance and steadily improving underwriting results. There was a notable lack of new capacity despite continued favourable market conditions.
-inari, a core technology infrastructure provider for the global insurance and reinsurance industry, raised $5.2m in funding as part of their Seed round led by Caixa Capital Risc, through Criteria Venture Tech. The funds raised from this round of financing establishes Barcelona-based inari as a global leader in (re)insurance technology services and will provide further impetus to inari’s longer-term growth strategy, which includes expanding the teams in both Barcelona and London, venturing into new territories expanding its geographical footprint and building more features based on its innovative and best-in-class technology to fit their current (re)insurance customers and new customers’ needs.
-The non-life insurance industry is adjusting rapidly to the new higher interest rate era ushered in by the most intense monetary policy tightening since the 1980s. Swiss Re Institute expects 2023 to be a transition year–with improving profitability for non-life insurance globally, as the industry continues to adapt prices to an elevated risk landscape, while higher portfolio yields boost net investment income. According to the sigma study "Raising the bar–non-life insurance in a higher risk, higher return world", despite the stronger profitability outlook, non-life insurers' profitability is expected to remain lower than their increased cost of capital in 2023. This suggests that further rate hardening and constraints on capacity are likely to continue throughout 2024.

West and Central Europe Trends(16,723 articles)