The top 30 European Insurers 2021: A turbulent time

The gross written premium of Europe’s 30 largest insurers fell in 2020 for the first time in several years. Overall, the total GWP reported by the non-life insurers in this ranking was 0.7% lower than the aggregated figure for 2019 (compared to growth in GWP of 8.6% in 2019 and 4.4% in 2018).

While around two-thirds of the companies in this study achieved some level of premium growth in 2020, on an aggregate basis, the growth rate was pulled down by a decline in GWP (in euro terms) among some of the larger players that report in other currencies.  

Foreign exchange movements can have a material impact on premiums and profits for both companies that write significant business in currencies other than euros, and for those that report in currencies other than euros. In the GWP table, the decline in premiums in 2020 shown for Lloyd’s, Aviva, RSA and Direct Line (which report in British pounds) and for Zurich and Chubb (which report in US dollars), was partly due to the impact of exchange rate movements. Zurich, Chubb and Aviva reported premium growth in their reporting currencies in 2020, but a decline once converted to euros. Lloyd’s, RSA and Direct Line saw a premium decline in their reporting currencies, but to a lesser extent than the decline shown once converted to euros.

The lower economic activity in 2020 also had a dampening effect on GWP for many non-life lines, primarily in commercial insurance. However, commercial lines also saw rate hardening which partly counteracted this effect. While personal lines GWP is less affected by lower economic activity, some insurers offered partial premium refunds for motor and other lines to compensate for lower use during periods of government-mandated lockdowns, which had a dampening effect on premium volumes.

The five largest participants’ share of GWP (compared to the total of the top 30) was just under 50% in 2020, while the proportion accounted for by the 10 largest insurers was roughly 72%.

Allianz and Axa – both predominantly retail focused – are the two largest participants, and accounted for just over a quarter of total GWP in the dataset.

Despite this concentration, most European insurance markets are relatively competitive. Furthermore, each market has its own idiosyncrasies, with product and distribution channel mix dictated by the history and culture of each particular country. As a result, the list includes a number of groups that underwrite the majority of their insurance portfolios in their country of domicile.

Of the 30 companies in the ranking, six are domiciled in France, five in Germany, four each in the UK and Switzerland, three each in the Netherlands and Spain, and two in Italy. Austria, Belgium and Finland are each represented by one group.

Key movers

While analysis of the GWP table shows more movement in the rankings year-on-year than is typically the case, AM Best notes that the Top 10 remained unchanged from 2019. As noted, Allianz and Axa maintained their clear dominance at the top of the ranking, despite premiums staying largely flat for the year.

Lloyd’s, Chubb and Zurich all showed declining GWP having been negatively affected by exchange rate movements.

Ranked sixth in both years, HDI experienced 6% growth in GWP in 2020, the highest growth in the Top 10 (following 17% growth in 2019). HDI’s non-life GWP figure includes reinsurance business (written by Hannover Re) which drove the growth seen in 2020, together with commercial specialty insurance. Both segments benefited from premium rate improvements in 2020.

Mapfre remained in ninth position, despite a reported 8% decline in non-life GWP. Mapfre reports in euros but writes premiums in many other currencies due to a strong presence outside the Eurozone, particularly in Latin America. The decline in premiums in 2020 was partly down to currency depreciations. The effect of a multi-year contract written in 2019 was also a factor.

Among the groups ranked 11 to 20, there were only two movements, with the ranking of the majority unchanged from 2019. Ergo moved up two notches to position 13. The company’s non-life GWP has been largely flat in recent years (declining by 0.3% in 2019 and growing by 1.5% in 2020) and its movement in the ranking has mainly been due to larger changes in premiums among the groups that surround it.

RSA swapped position with Ergo, moving to position 15 from 13 in 2019, reflecting a decline in GWP of 8% in euro terms. This decline, shown in the GWP table, is exacerbated by the exchange rates. In British pound terms, RSA’s GWP declined by around 2%.

Unipol remained in position 14 in 2020 despite a decline in non-life GWP of 4%, due primarily to premium refunds and discounts to motor insurance customers to reflect lower vehicle usage during lockdowns.

The most notable changes in the top 30 ranking is towards the bottom of the table among the companies in positions 21 to 30, where nearly every company changed position.

This section saw three newcomers shake up the ranking. ASR, domiciled in the Netherlands, entered at position 27. In 2019, it lay just outside the ranking at 33. The group’s non-life GWP grew by 14% in the year, driven by organic growth in health and disability GWP, as well as an acquisition completed in 2019.

NN Group, also domiciled in the Netherlands, entered at position 28, up from 34 (and outside last year’s ranking), driven by non-life GWP growth of 13.5%. This follows its acquisition of Vivat Non-Life, which was completed in April 2020.

The third newcomer is Bâloise in position 30, up from 32 in 2019, with growth of 7.6%, reflecting the inclusion of business from two acquisitions in Belgium.

AIG Europe, Societa Reale Mutua and Powszechny Zaklad Ubezpieczen all left the top 30 in 2020.

The difference in GWP between the bottom five groups is very small, making the ranking subject to change from relatively small movements.

Profit after tax

Overall profit after tax was significantly lower than in 2019, with the majority of companies reporting lower PAT levels, and only a handful showing improvements.

For many of the players, a common driver of the decline in PAT is the negative impact from the Covid-19 pandemic, driven by provisions for pandemic-related non-life claims, in particular for event cancellation and non-property damage business interruption claims.

Business interruption policies typically do not provide cover in the absence of property damage. However, commercial lines insurers have been affected by Covid-19 lockdown-related non-damage BI claims in a number of European countries, such as the UK, France and Germany, due to ambiguous contract wordings.  

European insurers for which motor business dominates saw a positive effect on technical performance due to lower claims frequency during the periods of lockdown and semi-lockdown throughout 2020. For companies writing both motor and commercial lines insurance, the positive effect on motor helped partially offset the negative impact from Covid-19-related commercial lines losses.

As illustrated by the PAT figures, the overall impact was moderate, with most companies remaining profitable despite the pandemic. In fact, of the top 30, only Lloyd’s reported a loss after tax for the year. Lloyd’s loss for the year included net incurred Covid-19 losses of £3.4bn after reinsurance recoveries.  

Other drivers of PAT decline were company specific. Most notably, Sampo’s PAT declined by 91% to  €112m from €1.2bn, reflecting a sales loss and impairment charge related to its (reduced) holdings in Nordea. 

It is worth noting that a significant number of companies listed in the table – including Allianz, Axa, Assicurazioni Generali and Aviva – also underwrite life business. The PAT value therefore does not speak to their non-life performance alone.

Solvency

In 2020, the 30 largest European insurers continued to benefit from strong regulatory solvency ratios as demonstrated by the Solvency II coverage ratios shown in the solvency table. Solvency II coverage ratios are available for 25 of the 30 listed companies. The four groups domiciled in Switzerland are subject to an alternative regulatory solvency regime and Ergo does not file a group report as it is included within the Munich Re Group report.

Of the groups for which Solvency II ratios are shown, only Lloyd’s has a ratio below 170% and the majority (60% of the 25) have ratios above 200%, illustrating the strong solvency position of the European insurance sector. 

A number of groups did not pay dividends in 2020, following pandemic-related regulatory restrictions, which helped their solvency ratios. However, not all European regulators took this approach.

Year-end 2020 solvency ratios also benefited from the reversal of the unrealised losses suffered in the first quarter of 2020 as global financial markets recovered following the turbulence seen in March 2020.

The highest ratios tend to be held by mutual groups, which do not have to consider return on equity for shareholders, and by those underwriting reinsurance and large corporate risks, where strong solvency is a competitive advantage.

AM Best’s Outlooks

France, Germany, Italy, Spain and the UK are the leading markets in Europe by GWP, and economic conditions within each country have an impact on insurance demand. AM Best has a stable outlook on the non-life insurance markets of all these European countries, with the exception of the UK, where the outlook remains negative. Although AM Best expected the Covid-19 pandemic and accompanying economic downturn to have a negative impact on the premium income and profits of European non-life insurers, it was expected that this impact would be manageable – which turned out to be the case.

Germany’s stable non-life insurance outlook reflects AM Best’s expectation that an economic recovery will drive top-line growth and that good underwriting discipline will support resilient results. Covid-19 losses have impacted commercial and industrial lines supporting further rate improvements. Strong capital adequacy and conservative investment portfolios also support the stable outlook. The low interest rate environment and subdued investment returns present headwinds for the segment.  

For France, an expectation that an economic recovery will support top-line growth also underpins the stable outlook, together with strong risk-adjusted capitalisation and resilient underwriting performance, helped by good diversification. The persistent low interest rate environment is also a headwind for this segment. In addition, AM Best notes that while the claims impact of the pandemic in 2020 has been manageable, significant uncertainty remains for 2021 in particular for business interruption claims.

AM Best’s outlook for the Spanish non-life insurance segment is also stable. The stable outlook reflects continued strong and stable underwriting performance, supported by limited exposure to catastrophe and Covid-19 losses. Spain’s non-life insurance segment is one of the most profitable on a technical basis in Europe. The stable outlook also reflects expected recovery in premium growth and the segment’s strong risk-adjusted capitalisation. Here again, the low interest rate environment and the potential for investment volatility present headwinds.

The stable outlook for Italy’s non-life segment also reflects a projected recovery in premium volumes following a contraction in 2020. In addition, the segment’s strong underwriting profitability and resilient risk-adjusted capitalisation underpins the stable outlook. Headwinds are represented by the segment’s high exposure to Italian government bonds and the Italian banking sector.

By way of contrast, the outlook for the UK remains negative. This reflects pressure on premium income and investment earnings from the economic effects of Covid-19 and Brexit. In addition, technical results for motor are expected to suffer from the impact of strong competition and claims inflation, and there is increased regulatory scrutiny of pricing practices for home and personal motor insurance.