AM Best maintains stable outlook on Italy’s non-life insurance segment

AM Best has maintained its stable outlook on Italy’s non-life insurance segment driven by natural catastrophe risks gaining relevance, expected maintained profitability, and stable growth sustained by underwriting discipline.

Natural catastrophe risks are gaining relevance due to new laws effective March 31, 2025, which require large enterprises to have insurance coverage for earthquakes, floods, inundations, and landslides. Medium and small enterprises will be included under these requirements later in 2025.

Under these rules, insurers are obligated to offer coverage for these risks but may manage their exposure within their risk appetite and access reinsurance support from the government-owned reinsurer, SACE S.p.A. The total reinsurance capacity for these risks is set at EUR 5 billion per year until 2026 and is guaranteed by the state.

AM Best expects this new natural catastrophe scheme to increase gross written premiums (GWP) in Italy’s non-life sector by a low single-digit percentage.

The law will help expand coverage for risks that have been underinsured in the past, improving risk diversification. However, it also raises insurers’ exposure to natural catastrophe risks, making reinsurance protection essential to limit volatility in underwriting results.

AM Best anticipates that insurers will need to supplement the quota share reinsurance offered by SACE with additional reinsurance protection, exposing them to fluctuations in price and availability.

AM Best also highlighted new challenges stemming from recent regulatory updates on bodily injury compensation and non-pecuniary damage, primarily impacting motor insurance, and to a lesser extent, general liability and medical malpractice lines.

A major update of the commonly used Milan tables took place in 2024, including adjustments to interest rates, life expectancy, and inflation assumptions.

These regulatory changes are expected to continue driving up claims costs, posing a challenge to non-life insurers in 2025. Nevertheless, AM Best believes the segment will implement additional rate increases to mitigate these impacts and maintain profitability.

Moreover, AM Best expects non-life insurance GWP to grow steadily in 2025 across all lines of business, driven by moderate price increases and higher business volumes from the mandatory natural catastrophe coverage.

While claims inflation and strong competition are expected to remain challenges for Italian non-life insurers, AM Best anticipates the segment will continue to demonstrate solid profitability in 2025. The market has shown flexibility in absorbing price increases, especially in the motor line, to offset claims inflation.

This website states: The content on this site is sourced from the internet. If there is any infringement, please contact us and we will handle it promptly.