Dutch insurance sector and rating outlook stable despite decline in govt bond yields

Written by Adam Cadle

03/12/2019

Fitch Ratings has maintained a stable sector outlook on the Dutch insurance market for 2020, despite a decline in government bond yields in 2019.

Dutch life insurers have made significant progress in adapting to the low-rate environment by revising and product offerings. In particular, Dutch insurers’ business models are not reliant on selling interest-sensitive products, and are able to manage the duration risk related to the run-off of long-term guarantee business.

The rating outlook for Dutch insurers is stable, reflecting Fitch’s expectation that Dutch insurers are well positioned to managed a macro environment of declining interest rates, a shrinking individual life insurance market, and strong competition in all business segments. Fitch maintains a Positive Rating Watch on VIVAT Schadeverzekeringen N.V. (VIVAT’s non-life insurer) due to the pending sale to NN Group which will benefit the former’s rating.

All Dutch insurers’ Insurer Financial Strength ratings are investment grade and mainly at the upper end of the ‘A’ (Strong) category. This reflects their typically very strong business profiles in the Netherlands and international diversification, very strong and stable capitalisation and generally low investment risk. These strengths are offset by weaker though gradually improving financial performance which remains a key ratings constraint. VIVAT N.V.’s lower ‘BBB+’ (Good) rating reflects its weaker, more volatile financial performance, and more limited business diversification.

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