Improved rates and investment returns support Spanish insurers’ profitability

Written by Adam Cadle

30/11/2023

The Spanish operating environment will stabilise in 2024 leading to neutral sector outlooks for both life and non-life insurance, Fitch Ratings has said.

Fitch expects the profitability of the non-life sector to marginally improve in 2024 supported by higher technical income and investment returns. It expects CPI inflation to reduce to 2.3% in 2024 leading to a reduction in pressure from claims inflation, and said the sector should also benefit from the pricing actions taken in 2023.

"However, the inflationary pressures are likely to remain, so maintaining underwriting discipline remains key to restore technical profitability in motor and health lines. Overall, we expect non-life profitability to stay resilient, with combined ratios below 100%," it added.

Fitch expects life sector earnings to remain strong supported by increased interest rates, while the growth of life premiums is likely to slow.

"We expect life risk products growth to be affected by reduced lending activity and life savings growth moderating, after a significant increase in premiums in 2023 due to lower disposable income and stronger competition from banking products. Higher interest rates are positive for the life sector’s profitability and capitalisation, and its ability to offer guaranteed savings products."

Fitch expects the Spanish insurance sector to remain strongly capitalised in 2024.

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