Despite some improvements, challenges remain for European insurers

Europe’s major insurers generally experienced growth last year and are seeing improvements in the economic environment, but several challenges remain for the industry there, according to the latest special report from A.M. Best.

Overall, total gross premiums written for the 20 largest European insurers (both life and non-life) increased by 2.2% in 2012, the report notes.

However, in Spain, GPW decreased 5.5%, and while Germany had total premiums increased by 1.5%, low interest rates remain a prominent challenge there, mainly for life insurance firms, the report suggests. France also saw the sector “contract” by 4.6%, the report notes.

Large claims did come from rainfall and flooding in central Europe in June, although losses are “well within most companies’ catastrophe loss budgets for 2013,” and the rest of the year has had a relatively low level of catastrophes, the report suggests.

“European insurers are seeking a more centralized purchasing of reinsurance as they increasingly focus on enterprise risk management (ERM) and attempt to protect consolidated group balance sheets,” the report also notes.

“ERM encourages complex insurance organizations to develop a risk appetite at the group level and manage it holistically through targeted reinsurance protection, rather than on a silo basis,” it adds. “The eventual introduction of Solvency II is expected to encourage companies to keep capital at a holding company level as this enables insurers to allocate capital more efficiently.”

The rating agency said it is continuing to stress test the balance sheets of the companies it rates as European policymakers continue working on a “long-term solution to Eurozone imbalances.”