The low interest rates constitute a threat for the profits of the European non life insurers. According to Moody’s, these profits may decrease by 10% to 20% in average over the next three years because of the decrease in return on investment. In absolute value, insurers would sustain from 3 to 5 billion EUR (3.1 to 5.3 billion USD) in future lost earnings.
The rating agency adds that the impact of such losses would be more substantial in countries where the combined ratio is high. It is especially, the case of France where investment returns account for an important share of non life insurers’ profits.
With the annual renewal of non life contracts, these insurers have, nonetheless, the possibility to diminish these effects by acting on their tariffs. Moody’s, therefore, estimates between 0.5% and 1% on average the annual tariff increases required to offset falling investment products.
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