Sovereign risk slows down the prospects of Italian insurance groups. To say it is Fitch, in his Report on companies of the Peninsula for 2014, in which he specifies that the high amount of government and corporate debt securities they hold in their investment portfolios represents a serious risk factor for companies in the sector, such as to justify a negative rating.
In its report, the rating agency underlines the improvements in the credit fundamentals of the non-life companies compared to the lows recorded in 2010, but forecasts a marginal deterioration in technical profitability in 2014 due to the deterioration of pricing conditions and an increase in the loss ratio. According to Fitch, life premiums will continue to grow over the next year as well, but at a slower pace than in 2013 (with a much lower percentage than 10%), reflecting the demand for protection and guarantees.
As mentioned, however, it is above all the volatility of the market value of Italian bonds that calls into question the profits of the insurance groups, together with the political instability which, for too long, has been blocking the reforms of the insurance market, especially on the introduction of new compensation tables concerning physical damages, which in Italy have a higher incidence than in other countries. The positive aspect of the sector, for Fitch, is the strong liquidity of Italian insurance companies.
