How will the European P&C insurance industry perform in the second half of 2024?

Claims will play a big role

How will the European P&C insurance industry perform in the second half of 2024?


By Kenneth Araullo

Claims inflation is expected to remain a significant issue in the second half of 2024, with insurers struggling to increase rates sufficiently to offset rising expenses, according to Bloomberg Intelligence’s (BI) Europe P&C Insurance Midyear Outlook.

The analysis indicates that while average premiums increased by 7.5% during 2023, costs rose by 10.9%.

BI noted that claims costs are continuing to outpace premiums, with UK auto Consumer Price Index (CPI) maintenance and repair costs up 8% in the year to June. The firm suggests that the implementation of IFRS 17 accounting could sharpen investor focus on book value and returns, although the new accounting rules have not yet dampened sentiment in 2024.

BI identifies three key themes for 2024: inflation, high costs, and the necessity for premium rates to rise. Claims inflation characterised trading in 2023, and BI expects it to continue in 2024. The cost ratio for most insurers remains high, which is impacting returns and is exacerbated by both inflation and claims inflation. This situation makes cost-cutting difficult, particularly when top lines are stalled by weak economies.

Inflation-driven upward pressure on claims paid and costs makes it imperative for insurers to continue pushing premium rates up in 2024, according to BI. Margins are likely to remain under pressure as claims inflation persists longer than anticipated.

Kevin Ryan, senior insurance industry analyst at Bloomberg Intelligence, commented on the situation, noting European P&C insurers’ concerns about crimped margins in 2023 due to rising inflation and interest rates.

“European P&C insurers’ concerns about crimped margins in 2023 as inflation and interest rates rise, combined with the continued war in Ukraine, didn’t lead share-price returns to slow significantly. Premium rate increases in many cases appear to be keeping up with inflation. It’s important the premium increases are maintained throughout 2024 to protect margins, which remain thin,” Ryan said.

Continued recovery for European P&C insurers

The share prices of Bloomberg Intelligence’s European property and casualty (P&C) insurer peer group rose by 11.4% in euro terms (11% in dollars) year-to-date through June 28, outperforming the Stoxx Europe 600 Index’s 10.7% increase amid economic challenges posed by inflation and ongoing geopolitical uncertainty.

This performance continues the recovery from March 2020’s lows, when shares plunged an average of 44% compared to the start of the year. European P&C shares have moved up in 2024, outperforming the broader market by 6.8 percentage points.

Ryan added that European P&C insurers’ price returns have been supported by robust business models in 2024, underpinned by strong capital bases.

“Recognition of that underlying strength doesn’t appear to be giving way to concerns about economic stability, inflation and war in Europe. The demonstrable ability of insurers to run their businesses with staff working from home during COVID-19 helped performance in 2021, and the organizational strength this demonstrated has helped performance in 2022, 2023 with momentum continuing in 2024,” Ryan said.

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