Insurers challenged by a stagnating market but could benefit from their strong positions in insurance markets in Central Eastern and South-Eastern Europe

Europe

Austria’s domestic insurance market continues to fall, a report by Fitch Ratings has found.

Insurers experienced a two-year fall in gross written premiums (GWP), with rates dropping by 1.7% in 2011 and 1.2% in 2012.

The overall decline in GWP reflects poor life insurance results which dropped by 6.8% in 2011 and 6.7% in 2012.

In contrast, non-life business grew, but not enough to offset the decline in life insurance.

But Fitch Rating said there may be opportunities in Central Eastern and South-Eastern Europe (CESEE), as Austrian insurers are closely linked to insurance markets in CESEE, where one-third of their premium income originates.

It said that it expects CESEE to become more important to Austrian insurers because the region’s growth rates are expected to exceed Austria’s.

However, it added: “Although CESEE insurance business is generally profitable, it adds volatility to Austrian insurers’ balance sheets and earnings because CESEE countries show a relatively high sensitivity to global economic downturns.

“Issues connected with low interest rates remain one of the biggest challenges for the sector, but investments recovered during 2012 as the level of write-downs fell considerably compared with 2011. As underwriting results also improved for all three business lines, life, health, and property/casualty, the sector’s overall profitability in 2012 was considerably better than in 2011.

“Austrian insurers face stiff competition, but underwriting results in non-life lines are expected to make up for low investment yields and the low profitability in life insurance. Most of the larger players in the market should once again benefit from increased growth in the CESEE region in 2013, but earnings from this region are set to remain volatile.”

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