Life insurance in Netherlands is facing concerns because of a decline in premium income and weak profitability. However, insurers’ strong capitalisation and low investment risk is expected help them to absorb the pressures they face in next few years.
Netherlands has one of the largest pension savings in the world and because of it the savings at Dutch life insurers is relatively low compared to other European countries. In the Netherlands, only 2.9% of the Gross Domestic Product (GDP) is spent on life insurance. Roughly 9% of all household savings is allocated to life insurers. This capital is equal to €150 BN and is being managed and invested by insurers, who employ a total of more than 50,000 people in the Netherlands
Dutch Central Bank (DNB) came out with a report on “Vision for the future of the Dutch Insurance Sector” where it pointed out that insurance ought to make fundamental choices (ex – investing in technology, going global, mergers & acquisitions) in order to protect the financially solid insurance sector due to the low rates of interest rate, competition in the insurance market and innovative technologies. Life insurers were found to be particularly vulnerable to the low interest rate environment due to their long-term commitments. It is recommended that life insurance companies should limit their capacity and secure the long-term interest of their policyholders by adopting their operations to the shrinking portfolio, as well as by making realistic cost assumptions in their technical provisions and subject these assumptions to stress tests.
Currently six big insurers dominate the life insurance industry in the Dutch market. With a small and decreasing market it is believed that further consolidation is an important step in efficiently running current individual life portfolios that are decreasing in size. Consolidation between the ‘big six’ has not yet taken place for a variety of reasons, ranging from state ownership and regulatory reluctance to technological barriers. The big six are: AEGON, Nationale Nederlanden, SNS Reaal, Achmea, Delta Llyod, ASR. Recent NN Group’s takeover approach to Delta Lloyd reinforces expectation that M&A activity in the Dutch market could accelerate
Individual life is expected to continue to reduce and flatten over the coming 10 years, reaching a new steady state that mainly consists of protection and some annuity insurance. Pension premiums are expected to increase due to renegotiation of new DB pension contracts at lower interest rates.
Analysis of future profitability: New business for individual life savings and annuity products have decreased drastically. In order to maintain size, insurers have shifted focus to individual protection products. Together with the low interest rate environment, this has put severe pressure on the profitability of new business. On top of decrease in technical result, insurers still face the risk of future claims regarding the miss-selling of unit-linked products. These potential claims could put additional pressure on future profitability.
Solvency II is a major change that will impact the insurance industry on many levels. The product mix of life insurers will be affected, due to the higher risk based capital required for products with guarantees. This will lead to different investment strategies; investment portfolios will be de-risked and matching between assets will increase. Furthermore, Solvency II will lead to a stronger regulatory focus on risk management and will increase the cost of reporting. The average solvency ratio of Dutch life entities is currently well above 100%, but is relatively low compared to peer countries.
According to the research report “Life Insurance in the Netherlands, Key Trends and Opportunities to 2020”, the life insurance industry has changed to a great extent. Due to fiscal and regulatory changes, individual life insurance will remain at a much lower level than earlier volumes. People have moved to Banksparen as a cheaper option than insurance life savings products. Low investment returns and low interest rates make insurance life products very unattractive, as guarantees in the product have become expensive. New individual life should be built on agile and low cost IT platforms with a focus on digitalising client interfaces. This will help life insurers to maintain a healthy balance sheet and P&L in the group pension business.
Topics Covered in The report
- Global Life insurance industry
- Life insurance industry Netherlands
- Netherlands life insurance market research
- Life insurance sector trends Netherlands
- Netherlands life insurance regulations
- Life insurance companies Netherlands
- Netherlands Insurance Gross Written premium
- Netherlands life insurance sector future outlook
- Netherlands life insurance market size
- Netherlands life insurance market growth
- Netherlands life insurance market trends
- Netherlands life insurance market future
- Netherlands life insurance market analysis
- Netherlands life insurance market Share
- Netherlands life insurance market Revenue
- Netherlands life insurance market
To know more, click n the link below:
Ankur Gupta, Head Marketing & Communications