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Life insurance to drive growth in Italian insurance industry through 2020

Published 24 January 2017

The Italian life insurance sector is expected to continue growth in the country's insurance industry through 2020.

The life segment accounts for three quarters of the industry, meaning the negligible or negative growth that has occurred in the non-life and personal accident and health sector.

The life insurance segment grew at a compound annual growth rate (CAGR) of 11.6%. This growth was driven primarily by the rising popularity of long-term investment products with guaranteed returns. Timetric forecasts lower but still impressive growth in the segment at a CAGR of 4.7%.

Bancassurance the leading channel for life insurance

Bancassurance generated 63.4% or new business premiums in Italy in 2015. It dominates the market for distribution, with agencies the next largest channel at just over 12%. Italy’s banks have struggled greatly since the financial crisis in dealing with non-performing loans and decreasing credit quality of retail and corporate customers in a tough economic environment.

Therefore, the distribution of life insurance has been a valuable source of revenue and this may have encouraged banks to become more active in distributing the insurance products it can sell via the agreements it has with insurers.

Persistently low interest rates threaten growth

The deflationary economic environment that has characterized the Eurozone economy over the past few years has led to the ECB gradually reducing its base rate to record low level of 0% whilst embarking upon a substantial programme of quantitative easing.

The unprecedented extent of this monetary easing has had pernicious effects on the life insurance industry in the currency bloc, including Italy. The low interest rates and purchase of sovereign bonds drives down the rates with which life insurers discount their technical liabilities.

This has the effect of increasing the present value of these liabilities whilst reducing investment income. Under a regime like Solvency II which requires market based reporting, the diverging paths of assets and liabilities can reduce the capital ratios of insurers, thus drawing the attention of regulators.

Source: Company Press Release