French insurers get leg up on inflation, recoup Fitch outlook
French insurers may now be getting rate at a pace to catch up to the long-running spate of runaway inflation, joining Dutch and UK non-life peers in recouping their neutral market outlook after having been initially hit by the global inflation plague, analysts at the Fitch Ratings agency have claimed.
“Insurers’ strong pricing and underwriting actions will mitigate claims inflation pressures and support technical margins,” analysts wrote in changing the sector's outlook in France from ‘deteriorating’ to ‘neutral’.
Fitch now expects 2024 price increases to be higher than in 2023 and slightly outpace easing claims inflation amid a “continued normalisation of supply-chain conditions”.
Personal line pricing power remains “constrained” by market competition as well as societal pressure. Commercial lines have already seen strong pricing momentum start to weaken, Fitch noted.
Actions taken to date in pricing or underwriting, including those to protect insurers against cat losses in the comparative absence of reinsurance cover, will be earning through into 2024.
Fitch expects “marginally improving combined ratios” amid improving attritional loss ratios, partially offset by higher nat cat ratios.
France is not out of the woods. Exercising real pricing power while managing reserving and reinsurance “is likely to remain challenged”.
It’s a long-awaited positive move from the agency which had begun warning on the impact of inflation on claims for European insurers starting in 2022.
As recently as the mid-year European outlook, Fitch had admitted to a “bearish tilt” on its overall sector outlook, saying non-life insurers may continue to struggle to keep up with inflation. Key markets had remained classified as deteriorating at the time, notably Germany, France, Netherlands, and the UK company market.
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