Moody’s Investors
Service has said the outlook for the Italian life insurance market
remains negative as consumers’ reduced ability to save and Italy’s
weakened economy continue to hit sales.
Macro-economically, the
ratings agency warned that with around 40%1 of their
assets invested in Italian sovereign bonds – at around €200bn at
the end of 2010– Italian insurers have significant sovereign
concentration risk.
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In Italy, as in many
other European countries, Moody’s expects that economic growth will
remain sluggish. It said the Italian economy entered recession in
Q3 2011 and forecasts a real GDP decline of up to 2% in
2012
Furthermore, the
intensification of the financial crisis at the end of last year and
the effect of the sizeable fiscal consolidation have heavily
affected Italian consumers’ sentiment since summer 2011, and life
premiums already contracted 18% in 2011, noted the Moody’s report
“Italian Insurance: P&C is Stable But Life Market Remains
Under Pressure”.
The result of all these
factors is that Moody’s expects life insurers’ sales and
profitability to remain constrained between 2012 and
2013.
Antonello Aquino, senior
vice president and an insurance analyst, Moody’s, also noted that
competition for consumer funds has intensified between banks and
insurers in Italy.
Aquino said: “Banks are
encouraging the sale of their own deposit-type products rather than
their insurance partners’ products as a means of securing
funding,”
Another worry trend is
that according to Moody’s the life insurance industry in Italy
reported a large net outflow of €4.2bn in Q42011, resulting in a
net outflow of €331m for the full-year 2011, compared to a €24bn
inflow in 2010.
It noted that the
Italian life industry also reported an outflow also in Q1 2012 of
€2.8bn.
The report said the
sharp deterioration in Q4 2011 was driven by the significant
outflow from unit and index-linked products, and a more marginal
outflow from traditional guaranteed products, as a result of an 18%
decline in life premiums in 2011. It noted there was also an
increase in the lapse rate across all the lines.
In spite of these
issues, Aquino said: “We continue to view the liquidity profile of
the sector as good, and do not currently expect that insurers will
need to liquidate assets – with the potential risk to crystallise
losses – to cope with periods of outflows.”
