Higher settlement costs due to high inflation, increasing uncertainty in estimating outstanding settlement obligations, possible changes in policyholder behavior as a result of early policy liquidation, the prospect of asset impairment and asset impairment are key risks posed to the insurance industry by rising interest rates. rates. This is highlighted in KPMG’s annual Private Insurance Market Report, which notes that “current market conditions with rising inflation and rising interest rates, and other economic and climate factors are likely to have a significant impact on the current and future financial performance of many insurers.” .

What risks are created in the insurance market due to rising interest rates.

Presenting the highlights of the annual study, Philippos Kassos, Partner in KPMG’s Audit & Insurance Department in Greece, noted that “In terms of premium production, 2021 has been a good year with an increase in registered premiums to around 4.5 billion euros (from 4.1 billion euros ). billion in 2020) with a focus on investment-related life insurance as well as satisfactory growth in non-life insurance. Earnings soared to a record €18M averaging €14M in the pre-pandemic era, and the return on equity rose to 8% from 6.9%.

The increase in production while containing costs and keeping the compensation ratio in the car at a relatively low level (despite an increase to 48% in 2021) has greatly contributed to the remarkable profitability of the companies,” said Mr. Kassos. Equity remained strong at €4.3bn, very close to 2020 levels, with negative return on investment significantly eating into period net income (€340m), which did not help capitalize companies. The core solvency coverage ratio rose to a record 191% from 186% in 2020.

As noted in the KPMG study, “a rich recent period – from late 2020 to early 2022 – in terms of fermentation and repositioning in the market by large insurance groups with the acquisition of AXA by Generali, Metlife by NN, but also the European Trust by Allianz, whose main goal was to create larger organizations, economies of scale and resist the expected intense competition. However, due to rising costs, the small size of the domestic insurance market with weak growth prospects and intense competition, the prospects for continued mobility and repositioning of insurance groups are estimated to continue, but at a lower intensity and volume in the near term and at a higher intensity in the medium term.” However, the result of these reclassifications is that the market share of the largest companies with a production volume of more than 200 million euros is constantly increasing, and the largest groups will put more pressure on competition.