Life Assurance Premium Income Revovering, €150 bn Life Reserves

After the significant decline in insurance premiums throughout 2015, data from the second quarter of 2016 confirms the return to a stabilisation of activity already seen in the first quarter of 2016: all sectors of insurance premiums have increased by an average of 0.33% compared to the same period last year.

Luxembourg’s Commissioner of Insurance has reported that, in the first six months of the 2016 fiscal year, the total insurance premium income recorded an overall drop of 0.93%, represented by a decrease in life insurance premiums of 0.68% and a decrease of 2.41% in non-life insurance premiums.

In life insurance, the half-year decline of 0.68% in premiums is attributable exclusively to unit life products whose premiums decreased by 3.88% while cashing on guaranteed returns products grew by 4.97%. These movements are part countercurrent to those of 2015, a year that saw a massive influx tounit-linked products. Given the persistently low remuneration that may be offered by the guaranteed rate products and the willingness for life insurers to redirect their customers to unit-linked products, however, it seems premature to see the figures for the 2nd quarter experiencing a trend reversal.

Total technical reserves of life insurance amounted to €150.52 billion at the end of June 2016, up 2.90% from the end of June 2015 and up 2.01% compared to the end March 2016. The increase of €2.97 billion in 2016 2 is attributable almost entirely to net inflows of some €2.66 billion – new premiums far exceeding redemptions – while financial returns only account for €0.29 billion to the growth of commitments. It should be noted that the significant net inflows are due primarily to the weakness of redemptions, the annual rate of redemptions amounting to 6.42% of technical provisions only, its lowest level over the last 12 years.

Non-life insurance premiums were down 2.41% for the first six months of 2016. Insurers working primarily, if not exclusively on the Luxembourg market, recorded a growth of 6.63%. Companies operating abroad in non-life insurance branches outside marine insurance instead saw their premiums decrease by 6.70%. Marine insurance – for which only the figures of Q1 are available and which is essentially due to a few large mutual whose premiums reflects the status of claims – fell by 5.20% during this period.