Premium increases needed to curb insurers’ crimping returns – BI

Insurers must continue to push premium rates up in 2024 if financial margins are to be protected, Bloomberg Intelligence (BI) has warned.

The warning comes after the firm’s Europe P&C Insurance Midyear Outlook, which was published earlier this week (3 July 2024), revealed that claims costs were still rising faster than premiums.

BI’s analysis suggested average premiums rose 7.5% in 2023, yet costs were up 10.9%.

An example of this trend is UK auto CPI maintenance and repair, with claims costs in the sector up 8% in the year to June.

However, BI’s senior insurance industry analyst Kevin Ryan said that “premium rate increases in many cases appear to be keeping up with inflation”.

“It’s important the premium increases are maintained throughout 2024 to protect margins, which remain thin,” he added.

P&C recovery

Despite rising inflation and interest rates – combined with the continued war in Ukraine – BI found that European property and casualty (P&C) insurers’ recovery continued.

For example, the share prices of its P&C insurer peer group rose 11.4% in euro terms and 11% in dollars in the year to June 28, which outperformed the Stoxx Europe 600 Index’s 10.7% increase.

That strengthened the recovery from March 2020’s lows, when shares plunged an average 44% versus the start of the year.

Ryan said that “European P&C insurers’ price returns have been supported by robust business models in 2024, under-pinned by strong capital bases”.

As a result, European P&C shares have moved up in 2024 and have outperformed the benchmark by 6.8 percentage points.

“Recognition of that underlying strength doesn’t appear to be giving way to concerns about economic stability, inflation and war in Europe,” Ryan added.

“The demonstrable ability of insurers to run their businesses with staff working from home during Covid-19 helped performance in 2021 and the organisational strength this demonstrated has helped performance in 2022, 2023 with momentum continuing in 2024.”