Market consolidation among Austria’s insurance and reinsurance undertakings, which was already observed before the introduction of the Solvency II regime, is continuing. This is one of the findings emerging from the Austrian Financial Market Authority’s “Report on the State of the Austrian Insurance Industry”, which has just been published for the second time. According to the report, the number of licenced insurance undertakings in Austria has decreased by 16% to 89 in the last five years. The sector’s profitability has once again deteriorated recently. The result from ordinary activities of the insurance undertakings, having increased between 2011 and 2013, has decreased in 2014 and 2015 by over 16 percent to EUR 1.13 billion, although this nevertheless is still the fourth-best result since 2002.
While the growth in premiums in Austria in 2015 was above the European average, the figures for the first half year of 2016, however, paint a far less rosy picture. One-off premiums, which were still highly attractive in 2015 have been hit particularly strongly during the first six months of this year, falling by over 40 percent, with the reason for which seeming to be an anticipatory effect of a falling guaranteed interest rate as well as changes to the tax framework. Generally Austrian insurance undertakings have been confronted with massive changes in recent years: the continuing prevailing low interest environment, change both in terms of the climate and demography, the advance of digitalisation, with Big Data and Cyber Risk, the introduction of Solvency II as well as the latest judgements from the ECJ and the Austrian Supreme Court (OGH) all present them with new challenges.
Austria’s five large insurance groups are currently active in 28 countries, predominantly in Central Eastern and South Eastern Europe, through almost 100 foreign participations. These subsidiaries sometimes hold dominant market positions in the countries in which they are active. Around one half of the premiums received by these insurance groups originate from abroad. More specifically, one quarter of the volume of premiums from abroad are from the Czech Republic, followed by 14% from Switzerland, 12% from both Italy and Poland and 11% from Slovakia.
The solvency ratios of Austrian insurance undertakings remain at a relatively high and stable level, despite very volatile financial markets and the challenges presented by the low interest environment. The average value (median) of the solvency ratio stood at 215 percent in mid-2016, with the weighted average standing at 247 percent. The solvency ratio is the ratio of available own funds to the solvency capital requirement, the latter being the level of own funds that an insurance undertaking must hold in order to ensure a 0.5% probability of an incapacity to pay in the next year, or of incapacity to pay once every 200 years.
The full report can be found on the FMA website (in German only) at https://www.fma.gv.at/en/insurance/disclosure/state-of-the-austrian-insurance-industry/.
Journalists may address further enquiries to:
Tiemon Kiesenhofer, MBA
+43/(0)1/24959-6010
+43/(0)676/882 49 610