The financial crisis that has brought uncertainty around the world can be expected to cause further unease in the European insurance sector, according to industry watchers.
The crisis is continuing in
Insurers are now reviewing their portfolios by geography, choice of product, delivery channels and the targeting of customers. "Everybody's fighting for every customer," Bauer said.
Bauer pointed to Axa, which, he said, has shown itself to be "quite expressive about where they want to grow and where they don't want to play, which is leading to a realignment of their geographical reach."
The European life insurance industry has moved away from guaranteed products, with the idea of reducing, or even eliminating, capital charges, Bauer said.
The pressures on life portfolios have pushed insurers toward runoff strategies, with some opportunities likely to occur for the consolidation of closed books, he said.
A Best's Special Report on the European life sector said low interest rates and looming regulatory change, such as Solvency II, are combining to create pressures for changes on both strategy and the management of capital.
"Sales volumes remain under pressure as a result of lower economic growth," the report said. "Protection business, closely linked to levels of retail borrowing and employment, has been particularly affected."
While noting that life volumes are beginning to suffer as a result of the crisis, Bauer said he has not seen a corresponding slippage on the nonlife side. "The commercial lines space broadly speaking is a healthier part of the market," he said.
The financial crisis has not diminished the interest of Lloyd's in
"Lloyd's continues to be very focused on
Currently, outside of the
Ribeiro said Lloyd's main strategy in
"Lloyd's does not go head-to-head against the big domestic players writing the big domestic property and casualty risks," Ribeiro said.
Like other organizations, Bauer said, Lloyd's is "trying to figure out where growth will come from, most importantly where sustainably profitable growth will come from."
Lloyd's is looking to Central and
"We will continue to invest in
In its 2011 annual report, Lloyd's anticipated claims volume growth as well. "With the current European debt crisis having the potential to evolve into another banking crisis and/or ‘double-dip’ recession, a significant rise in claims activity, particularly in the professional lines, remains a realistic possibility," the report said.
Bauer does see uncertainty in the motor insurance market as a result of a ruling by the
"I definitely see people thinking twice about the way they price their motor business," Bauer said.
Bauer believes a new understanding of risk is taking hold. Sovereign risk will remain an important factor in insurer calculation, no matter how Solvency II plays out, he said.
"Insurance companies are becoming more aware of the fact that 'risk-free' is a term which doesn't exist in the industry, even on the asset side any more," Bauer said.
Bauer offered no reassurance for the industry on investment income. While it is possible to make some money on the corporate bond side, he said, picking the right asset on sovereign risk is an increasing challenge.
"Yields are what they are," Bauer said. "Equity markets continue to be volatile."
Units of Aviva have current Best’s financial strength ratings of A (Excellent, and under review with negative implications). Units of QBE have ratings of A and A- (Excellent).
Lloyd's has a current Best’s Financial Strength Rating of A (Excellent).
|Copyright:||(c) 2012 A.M. Best Company, Inc.|
|Source:||A.M. Best Company, Inc.|