The eurozone recovery is expected to gather momentum from 2014 and GDP is expected to reach 1.6% growth per year in 2016-18. Financial services will however still face challenges from ongoing low interest rates, high unemployment and the regulatory agenda.
Insurers are under pressure to adapt their business models and redesign their product mix. A shift to less interest-sensitive products is forecast to help life premiums reach 4.1% growth in 2014, whereas non-life premium growth – at only 2.4% – is more limited. However, despite the challenging environment, profits in the insurance industry are forecast to average growth of 10% in 2014.
For most eurozone insurers, adapting their business models to a post-Solvency II world is likely to be much harder than meeting the required standards for capital, disclosure and reporting. With an implementation date of 1 January 2016 set, and the recent guidelines from EIOPA, insurers have a fixed target for reaching compliance. Better asset and liability management will also help to conserve profitability, though the new capital requirements for global insurers will have broader implications.
Insurance sector highlights