Fitch Maintains Neutral Midyear Outlook for Most Insurance Sectors

Fitch Ratings says its neutral midyear outlooks for the vast majority of insurance sectors and regions reflect steady fundamentals across most markets despite the evolving bearish economic climate.

Fitch said it expects non-life insurance claims to continue to normalize after pressures brought by the COVID-19 pandemic, although costs are now rising with inflation, which is proving both higher and more consistent than initially expected.

Non-life insurers can potentially mitigate some inflation pressures through a combination of repricing and investment earnings as interest rates rise, the rating agency said.

Fitch said it expects the evolving economic climate to have a more disproportionate impact on a handful of insurance subsector outlooks.

Explaining the lowering of its sector outlook for global reinsurance to neutral from improving, Fitch said it believes risks from rising claims inflation, financial market volatility, and higher natural catastrophe claims are increasing. The increased risks are the result of high economic inflation, partially exacerbated by the war in Ukraine, central banks' monetary tightening, and climate change.

"However, capitalization is very strong and should continue to improve, paving the way for capital repatriation," a Fitch statement said. "Rising interest rates will be positive for investment income, while underwriting remains disciplined, supporting margins through substantial premium rate increases."