Fitch Ratings says in a new report that prospects for growth in Nordic life insurance markets remain strong. However, life insurers will have to assess the economic viability of continuing to sell contracts with investment guarantees because this business faces high capital charges under Solvency II.
The Nordic non-life markets remain profitable, with pricing driven by a few dominant players. Fitch believes that the pricing cycle has turned favourably, and predicts an overall combined ratio for the region of below 95% for 2012.
In Fitch's view, growth in the life sector will be underpinned by the relatively strong Nordic economies, rising life expectancy and a growing awareness by consumers that state pensions and social welfare should be complemented by occupational and private pensions and individual savings.
Life product mix in the region remains skewed to traditional products with investment guarantees. Although these products face an unattractive capital burden under Solvency II, demand is unlikely to fall significantly in the short term.
"Life insurance policies with investment guarantees still account for two-thirds of premiums in the Nordic region," says Bjorn Norrman, Associate Director at Fitch Ratings. "Scale and cost efficiencies will be paramount to long-term survival for insurers offering this business, with consolidation likely as a result."
The report "Nordic Insurance: A Strong Industry Set for Growth" is available at www.fitchratings.com.
Fitch analysts will be touring the Nordic region in June to present a series of seminars on insurance and banking. Bjorn Norrman, co-author of the report, will speak on the Nordic and European insurance markets. The seminars will take place in Helsinki, Stockholm, Oslo and Copenhagen. To register your interest for an event, please click on one of the following links:
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