08 Jun 2020
Posted in Insurance
French insurers will struggle to turn profits with low interest rates and rising claims
A significant decline in the demand for insurance products is a major obstacle for French insurers to overcome at this time, however the biggest concern for the sector is ongoing profitability, says GlobalData, a leading data and analytics company.
Whilst GlobalData’s revised, post-COVID-19 forecasts for the French insurance industry shows that the pandemics impact on premium growth will not be as stark as other countries are experiencing, increased claims and low interest rates are set to impact on profitability.
Ben Carey-Evans, Insurance Analyst at GlobalData, commented: “We still expect the gross written premium (GWP) for general insurance to grow every year up to 2023, with annual growth only seeing a slight decline each year on our previous forecasts, however claims growth will soar and low interest rates will severely impact French insurers ability to make a profit.”
GlobalData expects growth in the total GWP value of the French general insurance industry to remain steady at 2.1% by the end of 2020, compared to the company’s previous forecast of 2.5%, at a compound annual growth rate (CAGR) of 2.2% up to 2023, compared to its previous forecast of 2.6%.
Carey-Evans, continues: “Although our revised forecasts do not indicate there will be a huge amount of damage, there are still considerable issues for the industry to overcome.”
The state-backed Air France reduced its international and domestic flight capacity by up to 90 per cent, and cancelled 3,600 flights in the month of March alone. The same impact can be seen on the motor sector, where sales stood at 2.21 million in 2019 and is expected to drop below two million this year. Reduced business across a range of areas will lead to fewer insurance contracts.
Carey-Evans, adds: “There has been a supply shock in France, as supply chain disruption has prevented production units from functioning. However, a larger issue has been reduced consumer and business activity resulting in a fall in demand and spending, which the industry will be hoping to see signs of recovery on during the rest of the year.”