European property/casualty insurers faced a dip in total average gross written premium and after-tax profit in 2020, but their regulatory solvency ratios remained strong. Pandemic factors generally played a role in both elements, according to a new AM Best market segment report.
Europe’s 30 largest insurers saw their gross written premium fall for the first time in 30 years. As well, many of the insurers saw their earnings take a hit from COVID-19-related losses, with overall after-tax profit significantly lower in 2020 than the year before.
Exchange rate changes also harmed gross written premium numbers, affecting insurers including Lloyd’s, Aviva, RSA, Zurich, Chubb and direct line insurers.
AM Best said that overall after-tax profit in 2020 hit “significantly lower” levels than in previous years, thanks to provisions relating to P/C pandemic claims including event cancellation and non-property damage business interruption claims. The issue was particularly acute in Europe compared to other global markets, the report noted.
“While BI policies typically do not provide cover in the absence of property damage, commercial lines insurers in a number of European countries have been affected by COVID-19 lockdown-related non-damage BI claims due to ambiguous contract wordings,” the report pointed out.
Solvency Capital Requirement Ratios
At the same time, the 30 largest European insurers continued to benefit from Solvency II-required minimum capital ratios, according to the report.
“The 30 largest European insurers continued to benefit from strong SCR ratios (where available), with more than half above 200 percent, which illustrates the strong solvency position of the European insurance sector,” AM Best said in the report.
The pandemic played a factor here, too. According to the report, the SCR ratios of several insurance groups in the ranking gained in part from “pandemic-related regulatory restrictions on dividend payments, though not all European regulators took this approach.”
Another factor that helped those numbers – the reversal of unrealized losses from the 2020 first quarter “as global financial markets recovered following the turbulence seen in March 2020.”
Source: AM Best