The outlook of the European insurance sector as of 2020 remains negative reflecting a growing pressure of macroeconomic uncertainty.
“Interest rates will remain low within a long period, which will affect solvency and profit for life insurers in the coming year,” said Benjamin Serra, the Vice President of Moody's Senior.
Low interest rates have weakened Solvency II, which will affect the sector's ability to withstand new shocks in 2020. The regulatory legislation also limits the actions of insurers in the market and leads to a moderate increase in capital requirements.
Moody's is expecting a decrease in return on investment by 15-40 basis points (b. p.) for property and casualty insurers (P&C); this will lead to a decrease in profits of 3-8% in 2020. Profitability of life insurers will decrease by 10-30 b. p., but the impact on profitability will be more muffled.
Besides, analysts expect the risks of recession, macroeconomic uncertainty, and deterioration in asset quality and asset loss to increase.
Moody's changed its outlook for the French and Dutch insurance sectors to negative, reflecting the pressure of low interest rates on players in the P&C industry. The prospects for the German life insurance sector remain negative.