In the face of economic strife, Italy’s insurance market is enduring considerable strain, particularly within its life insurance branch. Fitch Ratings’ 2023 Italian Insurance Dashboard indicates a significant slump in net inflows to these insurers, affecting both traditional and unit-linked life insurance products. Investor preferences seem to have shifted towards government bonds and other higher-yielding bank products. Concurrently, the sector faces elevated surrender rates, the likes of which haven’t been seen in over ten years. Despite these challenging times, there’s a silver lining on the horizon. Expectations are building that the current high-interest rates may start to retreat by 2024, suggesting a potential easing of pressures on the life insurance segment and possibly a return to more typical patterns of investment and policy retention. This forecast aims to bring some solace amid a decidedly tough period for the industry, with hopes pinned on a more stable economic environment ahead.
Under Pressure but Holding Steady
The non-life insurance sector is navigating through challenging times, with property insurance taking a hit from increasing natural disaster claims and rising reinsurance costs. However, this is somewhat balanced out by a decrease in motor insurance claims, which may signal an upcoming period of stability and recovery for underwriting profits. Adjusting premiums according to market shifts could further aid recovery.
Italian insurers show resilience in solvency, bolstered by narrower bond spreads and strong financial results. With 2024 on the horizon, they must remain vigilant. Key areas of focus include the renewed interest in traditional savings products, the direction of car insurance pricing, potential natural disaster impacts, and upholding strong solvency rates against the fluctuating spreads of Italian government bonds.
