Solvency, liquidity and profitability positions among global insurers show improvements

Written by Adam Cadle

02/07/2024

Solvency, liquidity and profitability positions among global insurers improved slightly in 2023, and overall, remained strong, according to the International Association of Insurance Supervisors (IAIS).

The IAIS’s 2024 Global Monitoring Exercise (GME) revealed that the main factors affecting solvency and profitability include higher interest rates in many regions (which can lower the present value of liabilities, particularly for life insurers offering longer-term products), higher premium income, lower dividend payments by insurers and an upturn in financial markets leading to higher investment returns. Some insurers noted changes to accounting standards, particularly IFRS 17, as a factor affecting reported profitability.

The IAIS said the movement in liquidity positions varied across insurers. Some insurers experienced increases in liquidity due to factors such as higher dividend upstreams (where a subsidiary insurer distributes profits to its parent insurer), completion of asset sales, or better alignment of liquidity sources to liquidity needs, while others experienced declines because of increased cash outflows or changes in their investment portfolio composition.

Furthermore, participating insurers took additional measures to manage macroprudential headwinds, maintaining stable and resilient solvency and liquidity positions. Such measures include developing new capital, liquidity and reserve requirement models; collecting more in-depth data; and monitoring interconnectedness between the banking and insurance sectors. Participating insurers also enhanced insurance risk monitoring and assessment frameworks, including stress testing.

The 2024 Global Monitoring Exercise (GME) builds on a rich data set collected from approximately 60 of the largest international insurance groups and aggregate sector-wide data from supervisors across the globe, covering over 90% of global written premiums.

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