Competition among European non-life primary insurers is increasing, despite rising claims inflation, according
to S&P Global Ratings in a report on the European insurance sector.
Property/casualty commercial insurers will face more pressure in 2025, said S&P, explaining that margins will likely
narrow as the market continues to soften while reinsurance rates are still elevated.
At the same time, however, combined ratios will remain below 100%, said S&P in its report titled “European Insurance Midyear Outlook 2025: Strong Finish Ahead.
” (Combined ratios below 100 indicate underwriting profits).
Claims inflation exceeded consumer price index (CPI) inflation in re
cent years and “will remain the main concern for European primary non-life insurers,” the report said.
Of particular concern, said S&P, is high motor claims inflation, which results from higher costs for car parts and garage repairs.
“In some markets, including the U.K., most motor insurers have already increased premiums to compensate for the
rise in claims. In countries such as Germany, however, motor insurers still have some way to go to adjust premium rates,” said the report.
“In addition to claims inflation, primary non-life insurers face high, albeit partially reducing, reinsurance cos
See more beautiful photo albums Here >>>
ts and high attachment points,” said S&P. “While diversified groups can absorb any negative effects relatively easily, regionally focused peers must pay significant
ly higher premium rates than before and retain a relatively larger share of regional natural catastrophe risk exposure on their balance sheets.”
In general, however, the European P/C sector will maintain profitability, despite claims inflation and rising natural catastrophe losses – including the floods in Central, Eastern, and Southern Europe in 2024.
Retail Sector Pricing Differences
S&P expects pricing in the retail sector will differ significantly between motor and home lines, with motor insurance prices declining by about 5%. However, underwriti
ng will remain profitable due to price increases in 2024, the report said.
By contrast, home insurance prices will remain elevated, as insurers struggle to keep up with claims inflation. S&P explained that significant price increases at the end of 2024 may enable insurers to break even, barring extreme weather events.
“Price comparison websites for motor and home insurance reduce operational barriers and lead to commoditization and increased competition from new entrants.”