Fitch Ratings says in a new report that the Nordic insurance market is becoming increasingly important as a supplement to the welfare state.
“The Nordic countries have long been associated with cradle-to-grave welfare states. However, demand is growing for private provision supplied by the insurance industry. Demand for occupational pensions is growing as a consequence of reductions to state benefits due to ageing populations,” says Bjorn Norrman, analyst in Fitch’s Insurance team. “Private health insurance is also gaining importance, reflecting dissatisfaction with public healthcare.”
Fitch expects consolidation in the fragmented Nordic health insurance market because the main profit driver will be scale. This determines insurers’ bargaining power for cost-effective procurement of health services and cost-efficiency in general, which is crucial in a competitive market.
Nordic insurers look set to be well-capitalised under Solvency II. However, clarification of the definition of contract boundaries which future cash flows to take into account in determining reserves and capital requirements will be crucial for group pension schemes, which account for a large part of the Nordic life insurance market.
“The inclusion or exclusion of expected but non-contractual cash flows, for example in respect of new employees joining a company pension scheme, can make a big difference to the capital position calculated,” says Norrman. “This is because expected profits in future premiums are likely to qualify as Tier 1 capital under Solvency II.”
Fitch’s report “Nordic Insurance – a Growing Supplement to the Welfare State” is available at www.fitchratings.com.
Fitch analysts will be touring the Nordic region in June to present a series of seminars on insurance and banking. Chris Waterman, Managing Director of Fitch’s insurance team, and Federico Faccio, Senior Director and co-author of the report, will speak on the Nordic and European insurance markets. The seminars will take place in Helsinki, Stockholm, Oslo and Copenhagen. To register your interest for an event, please click on the following links:
The Fitch Ratings ‘Viking Tour’ – Helsinki 14th June
The Fitch Ratings ‘Viking Tour’ – Stockholm 15th June
The Fitch Ratings ‘Viking Tour’ – Oslo 16th June
The Fitch Ratings ‘Viking Tour’ – Copenhagen 17th June
Source : Fitch Press Release
