Insurance companies in the UK and the rest of Western Europe should brace for slower growth this year amid persisting market pressures, according to AM Best’s forecast.
In its latest report, AM Best said Western European re/insurers will face a number of diverse challenges in 2017, with pressures coming from the fallout of political events such as Brexit and the forthcoming general elections and referendums in France, Germany and the Netherlands.
The ratings agency warned that the rise of populist parties and movements will create uncertainty and challenges for the market, as demonstrated by the Brexit vote and election of US President Donald Trump.
According to AM Best, primary insurers in general would withstand the challenges since they are relatively strong.
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“Nevertheless, while capital is not a great cause of concern, earnings are under pressure with limited growth opportunities,” the report said. “While more significant prospects are offered outside Western European markets, these are accompanied by their own various challenges.”
Given the soft market conditions and capacity available, industry consolidation is expected to continue in 2017, according to AM Best research and communications director Yvette Essen, who authored the report.
“Western European markets will see relatively modest economic growth, so expansion of insurance business volumes will be sluggish at best,” Essen said.
Essen’s report explained that given these pressures, seeking greater operational efficiency will become one of the main options to improve the bottom line.
“Thus, scale remains a key driver. It is therefore likely that M&A deals will continue, and niche portfolios will always attract larger companies looking to diversify their portfolios,” the report said.
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