Further rate rises persuade Moody’s to upgrade Dutch P&C sector

Ratings agency Moody’s has upgraded the outlook for the Dutch property and casualty (P&C) sector from negative to stable, as rising premiums help offset claims inflation.

The life sector has also been raised to stable, because of rising interest rates despite flat sales and “constrained” profits.

Moody’s said the trajectory of interest rates and central bank policies remains difficult to anticipate, but added that the current steady rise in rates will improve investment results for P&C insurers and ease pressure on life insurers.

The agency said that leading Dutch insurers’ solvency was “satisfactory” in 2021, with stable or slightly stronger solvency capital ratio coverage, and sufficient buffers to absorb the planned Solvency II reform.

“We expect P&C insurers to raise their prices relatively promptly in response to claims inflation and their relatively high catastrophe risk exposure. This, coupled with economic recovery, should sustain premium growth,” explained Moody’s.

The agency also noted that Dutch insurers have “marginal” exposure to the Ukraine conflict, but their profitability would deteriorate if the crisis triggered a severe downturn or recession.

Moody’s said Dutch P&C insurers have benefited from continued price increases, which have offset competitive pressure and the pandemic-related economic slowdown.

The agency said P&C price increases accelerated between 2018 and 2020, boosting premium growth by 2% year on year, despite competitive conditions and the economic shock of the pandemic. Motor insurers achieved the biggest price increases.

The agency said motor and property insurance accounted for more than 70% of gross earned premiums in 2020, compared with 65% in 2015.

“While prices fell slightly in 2021, we expect them to increase in 2022 and 2023, supporting premium growth. Economic growth remains positive despite the Ukraine crisis. This will also help sustain non-life premium growth,” added Moody’s.