AM Best, a global credit ratings agency, has adjusted its outlook on Italy’s non-life insurance sector, shifting from negative to stable. This alteration is underpinned by a surge in growth momentum, attributed to tariff adjustments and the stabilization of the economic climate.
In a detailed report, the agency elucidated its anticipation of sustained growth in non-life insurance gross written premiums (GWP) throughout the year. This prognosis aligns with the International Monetary Fund’s forecast of Italy’s inflation rate stabilization and a projected 0.7% growth in real gross domestic product (GDP).
According to the Associazione Nazionale fra le Imprese Assicuratrici (ANIA), the non-life GWP demonstrated a robust increase of 7.7% in 2023, marking the fourth consecutive year of expansion. Particularly noteworthy is the resurgence in Motor GWP, which constitutes over a third of the segment’s premiums, rebounding in 2023 after a period of contraction fueled by heightened competitive pressures.
AM Best also underscored the non-life insurance segment’s adept navigation through inflationary challenges, anticipating a diminishing impact of inflation in 2024. Analysts highlighted the alleviating effect of tariff increments, foreseen to counterbalance inflation’s influence on the motor business, thus reversing the downward trend in profitability.
However, AM Best cautioned that elements within the 2024 Budget Law could pose hurdles for property business across Italy. Notably, the legislation mandates corporate entities to procure coverage against earthquakes, floods, and landslides, effective since December 31, 2023. The implementation details, including expected limits, are pending finalization; nonetheless, preliminary market estimates suggest a potential doubling of insured value.
With the law already in force, corporate entities must comply by December 31, 2024. AM Best highlighted the historic reliance on the reinsurance market for mitigating natural catastrophe risks, which could result in insurers facing heightened volatility in results if desired protection levels are unattainable.
It’s pertinent to note that Italy ranks second-highest in protection gap scores for natural catastrophes across Europe, attributed to a combination of frequency, severity of perils, and low insurance penetration levels, as per EIOPA’s “Dashboard on Insurance Protection Gap for Natural Catastrophes.”
Conclusively, AM Best anticipates 2024 to be a year of robust and healthy growth for the non-life insurance segment, buoyed by the steadfast performance of non-motor lines of business and augmented investment income.
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