Dutch Insurers in Strong Financial Position to Face Macro Hurdles
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Loading... - Bianca Palumbo
- 13 Jul 2022
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Fitch Ratings-Frankfurt am Main-13 July 2022: Fitch Ratings expects volatility in Dutch insurers’ Solvency II (S2) ratios to increase due to the insurers’ exposure to fluctuating equity and real-estate prices, widening credit spreads (especially on Dutch mortgage spreads that are not covered by the S2 volatility adjuster), and potential credit deterioration. Nevertheless, insurers are entering an expectedly more volatile period with extremely strong capitalisation, and therefore solvency deteriorating to a level that affects ratings is unlikely.
In the short term, the re-pricing of equity, and the expected re-pricing of real estate assets as a result of rising interest rates, will be negative for investment performance. However, higher rates are long-term positive for the insurers through reduced re-investment risk, and thus through higher expected investment yields on bond portfolios.
Fitch believes non-life insurers are in a good position to absorb higher expenses as combined ratios have improved significantly in the past five years, but underwriting margins could come under pressure in case insurers do not, or only partially, pass on the cost of inflation to policyholders. Read More...
