European life insurers’ liquidity profile sufficiently strong to face higher lapses

Written by Adam Cadle

03/05/2023

European life insurers’ liquidity profile is sufficiently strong to face a moderate to significant rise in lapses, particularly in the two most exposed markets, France and Italy, Fitch Ratings has said.

“This is explained by the strong liquidity profiles and sophisticated asset and liability management techniques operated by insurers in both markets, as well as the regulatory framework in place, providing insurers with several mitigants they can adopt to prevent or limit policy lapses,” it added.

Fitch said it believes lapse risk on other European insurance markets is less prominent, either because of the existence of barriers to withdrawals (e.g. Belgium, Germany and the Netherlands), or because of the life insurance market is focused around different product types, less exposed to lapses (e.g. the UK).

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