Dutch insurers’ SII ratios around 200% level at end-2022

Written by Adam Cadle

18/05/2023

Leading Dutch insurers’ Solvency II ratios were around the 200% level at end-2022, mostly in line with the previous year, according to Fitch Ratings’ Insurance Rating Criteria.

Stable operating capital generation of about 20pp provided strong support for capital ratios amid volatile financial markets.

Top Dutch insurers maintain SII sensitives within reasonable limits in Fitch’s view, which contributes to the maintained capital strength of these companies. In 2022, SII ratios benefited from market fluctuations mainly through the strong increase of the SII volatility adjuster. Most Dutch insurers benefit from wider corporate credit spreads due to the overcompensating effect of the VA when corporate credit spreads widen. Counter-cyclical adjustments also affect equity price sensitivity, which could benefit SII ratios even with falling equity prices.

The combined IFRS shareholder’s equity of large Dutch insurers decreased by about €30bn in 2022 as fixed-income assets lost value as interest rates sharply increased. However, SII ratios were not significantly affected by unrealised fair value losses as SII financial statements calculate both assets and liabilities at market value, thereby eliminating accounting mismatches that cause volatility in shareholders’ equity in IFRS accounts, Fitch stated.

Large insurers’ fixed-income portfolios showed no sign of significant credit stress, Fitch added, reflected in the continued strong average credit quality of bond portfolios and very low non-performing rates of Dutch residential mortgages. Non-investment-grade and non-rated bonds accounted for €7bn at end-2022, or 7% of aggregate bond investments and 16% of aggregate shareholders’ equity.

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