The FINANCIAL -- While European insurers benefited from noticeable financial market improvements during 2013, they have continued to operate in a very challenging environment of slow growth and historically low interest rates, according to a new special report from A.M. Best.
The Best's Special Report, titled "Insurers Benefit from Improved Markets Despite Ongoing Pressures," notes that uncertainty surrounding the development of a more stringent regulatory environment, coupled with constrained household spending, are pressure points that have prompted European non-life and life insurers to re-engineer products, de-risk portfolios and secure large credit facilities in order to be better able to face potential liquidity challenges.
"The strength of European insurers' prospects for growth is tied to macroeconomic conditions, which will vary by country and region," said Stefan Holzberger, managing director, analytics for A.M. Best Europe. "We expect a period of uncertainty to continue in Europe as policy makers continue to work to resolve imbalances in the region," he added.
According to the report, U.K. non-life insurers have made significant progress toward compliance with Solvency II, which is scheduled to take effect across the European Union's 28 member states on 1 January 2016. However, there has been a relative lack of progress for that same group regarding the reporting and disclosure requirements under pillar 3 of Solvency II.
"Amid the threat of prolonged low interest rates, regulators in Germany are requiring that additional reserves be held given life insurers' commitments to products with strict investment return guarantees. In addition, Spain's insurance market has remained profitable as its economy has shown signs of improving, but the country is still saddled with extremely high unemployment at 24.5%," Holzberger added.