Best’s Market Segment Report: AM Best Assigns Stable Outlook to Italian Life Market

Business Wire

AMSTERDAM--(BUSINESS WIRE)-- AM Best has assigned a stable outlook to the Italian life insurance market. Key supporting factors include the active management of business mix, with a shift of production from traditional savings products to unit-linked and hybrid products. Profitability has been helped by average guarantees on in-force business that are low and expected to remain below investment returns. Furthermore, insurers demonstrate solid solvency, although balance sheets are sensitive to potential increases in interest spreads due to significant exposure to local sovereign bonds.

A new Best’s Market Segment Report, titled “Market Segment Outlook: Italy Life”, states the Italian life insurance market has reported healthy profits over recent years, and AM Best expects good market discipline to support prospective technical margins.

The report adds that holdings in Italian government debt expose the market to local economic and political instabilities, and a sharp increase in Italian government yields could weaken balance sheets due to the devaluation of assets. Italian life insurers are heavily exposed to the Italian banking sector, as the main distributor of their products and through investments in the debt instruments of financial institutions. The banking sector’s exposure to non-performing loans sharply decreased in 2017 and 2018, but remains at an elevated level.

Despite a challenging operating environment, the Italian life insurance segment is expected to maintain solid technical profitability and balance sheet strength owing to its proven ability to adapt its business mix and reduce average guarantees in portfolios through active management. However, further weakening in the operating environment, particularly a sustained recession or a widening in government spreads, could impact technical results and the solvency levels of the segment, and cause AM Best to revise its outlook to negative.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=284976.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.