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FOR IMMEDIATE RELEASE
LONDON - OCTOBER 04, 2018 07:36 AM (EDT)
The Spanish insurance market can be considered mature and stable, with a healthy level of capitalisation, according to a new A.M. Best report. In A.M. Best’s view, the aggregated investment portfolio of Spain’s insurance sector is materially concentrated in sovereign bonds, whilst non-life technical performance is relatively stable and showing sustained profit margins.
A.M. Best has drawn its conclusions following analysis of a fictitious company — “Spain Insurance S.A.” — based on statistics from the Spanish insurance sector. This has been conducted using Best’s Credit Rating Methodology (BCRM), which follows A.M. Best’s building-block approach, first introduced in October 2017.
The Best’s Special Report, “Applying A.M. Best’s Building Block Approach to ‘Spain Insurance S.A.’,” describes the Spanish insurance sector as well-balanced between life and non-life risks. Whilst life premium volumes have historically shown some degree of volatility, non-life has been steadily recovering for the last three years after a period of decline driven by the financial crisis.
Unveiling the report in Madrid at Entre 2018, Carlos Wong-Fupuy, senior director, A.M. Best, said: “Non-life profit margins vary quite widely across different business lines, but claims and expenses ratios are relatively healthy on an aggregate basis. The most important characteristic is that technical performance is relatively resilient, especially when compared with other European markets. The whole sector consistently generates technical profits without having to depend on investment returns to offset underwriting losses – as can be the case in several other European countries.”
Commenting on the life sector, Yvette Essen, director of research, said: “Despite the low interest rate environment around the world, technical profits for life business have remained healthy at around 7%-11% of net written premiums. On the other hand, premium volumes have historically been very volatile, reflecting their sensitivity to movements in interest rates and new product offerings.”
It should be noted that whilst BCRM has been designed exclusively as a framework for determining an insurance company’s credit ratings, in this particular case, it has been applied to Spain’s insurance market’s aggregated data for illustration purposes only. Included in this framework are quantitative and qualitative factors related to balance sheet strength, operating performance, business profile and enterprise risk management.
To view A.M. BestTV’s video on “Applying A.M. Best’s Building Block Approach to ‘Spain Insurance S.A.’,” please visit http://www.ambest.com/video/video.aspx?s=1&rc=spainbcrm1018 .
To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=278785 .
A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry.