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Keeping up with the market – January 2022

Every month we help you keep up with the Belgian insurance market.

 

Mergers & Buy-out

Octium & Credit Suisse

 

The international and independent insurance group Octium has announced that the acquisition of Credit Suisse Life & Pensions AG is completed. Specialized in the design and distribution of privately managed life insurance products, Octium group has approximately 10 billion euros in assets under management and has around 75 employees.

In 2017, Octium already bought out UBS International Life.Today with the Credit Suisse acquisition, the group is strengthening its international growth and strategic positioning on the European markets.

 

Monument Re & AXA Belgium

AXA Belgium agreed to transfer to Monument Re its run-off life insurance portfolio for 2.6 billion euros of BEGAAP provisions, subject to regulatory approvals. It has been the seventh transaction of Monument Re in Belgium.

Based in Bermuda, the life reinsurer and insurance holding company previously acquired the former insurer Integrale. Manfred Maske, CEO of Monument Re Group and Chairman of MAB (Monument Assurance Belgium) said: “After the closing of the deal with Integrale last week, we are delighted to announce this transaction which fits perfectly with Monument’s consolidation strategy and confirms Belgium as a key target market for us. Following earlier acquisitions of six other Belgian portfolios, this transaction with AXA Belgium continues that trajectory and affirms MAB’s position as the leading consolidator in the Belgian market.”

AXA Belgium & Crelan 

Thanks to the long-term partnership with Crelan and the acquisition of Crelan Insurance, AXA Belgium has reinforced its position on the Belgian market. First, in life insurance through the acquisition of Crelan Insurance, mainly active in the marketing of loan protection insurance. Also in non-life insurance with a long-term distribution agreement with the bank Crelan.

As we mentioned in our previous newsletter, Crelan is looking also to the future. Indeed, AXA has now completed the sale of AXA Bank Belgium (its Belgian banking operations) for 690 million euros to  Crelan. The operational merger of the two entities will take another two more years to be completed.

 

Partnership

Samsung & Bolttech

Samsung and the international insurtech Bolttech expended their partnership to 6 new European countries: the Netherlands, Norway, Sweden, Finland, Denmark, and finally Belgium. Their service was already operational in 7 Asian countries.

The insurance Samsung Care+ covers smartphones, tablets and portable devices against physical and liquid damage.

 

News of the market

Belgium takes stake in Ageas

The Belgian State, through the SFPI-FPIM, has acquired 6.3% stake in the capital of  Ageas to firmly anchor the insurance company in Belgium. After Fosun, the SPFI-FPIM is now the second shareholder of Belgium’s largest insurer. The threat that Ageas would be taken over by foreign investors is now lifted. The Belgian State also puts forward the argument that Ageas owns the subsidiary AG Insurance which plays a crucial role in pensions.
In addition, the Belgian Federal State was very supportive of the SFPI-FPIM’s decision. About the maneuver, Minister Van Peteghem said “The financial sector is one our six strategic investment pillars and we are focused on smartly anchoring companies that are of strategic importance to the country’s economy.”

 

Rebranding: Baloise Insurance becomes Baloise

In the course of the year 2022, Baloise Insurance will change its name to Baloise. This new denomination is part of the Baloise Group rebranding’s strategic plan: “Simply Safe: Season 2”. The aim is to simplify its brands and unify all group subsidiaries under one brand only: ‘Baloise’. For Baloise’s clients, all services and processes are meant to be more accessible and understandable thanks to this rebranding plan and the new marketing strategy.

 

2021: Top 10 most costly disasters in 2021

According to a study published by the British organization Christian Aid, the 10 most costly natural disasters generated damage over 170 billion USD. It is 13% more compared to 2020. As the estimated are based on insured losses only, the actual costs are higher.

Among the top 3, Hurricane Ida comes in the first place. It occurred at the end of August 2021 in the USA and costed 65 billion USD. In the second place, the floods that took place in Germany, Belgium, France, the Netherlands and Luxembourg in July, with damage totaling 43 billion USD of losses. Finally, Winter storm Uri, again in the USA, holds the third place with a total loss of 23 billion USD.

Regarding the flood damage in Belgium, the Disaster fund has received 5,274 case files so far: 40% are related to cars and 35% concern personal property. The application deadline is extended until 18 April 2022.

 

At Work

Top Employers Institute awarded 8 Belgian insurance companies

Every year, the Top Employers Institutes grants the label ‘Top Employer’ to Belgian and International companies with great working conditions and the best HR practices.

Out of 1857 companies, 84 in Belgium stood out. Among them, there were 8 insurance companies: Ageas, AG Insurance, AIG, AXA Belgium, Ethias, KBC(CBC), NN and P&V.

 

 

Sources:

Paperjam, Octium achète la branche assurance-vie de Crédit Suisse

Assuropolis, Le groupe Monument Re reprend le portefeuille Vie en run-off d’AXA Belgium

Monument Re group, Monument Re and AXA Belgium agree the transfer of a run-off life insurance portfolio

Assuropolis, Samsung lance une assurance en Belgique

Assuropolis, AXA renforce sa présence sur le marché belge de l’assurance

L’Echo, Avec AXA Banque dans son escarcelle, Crelan se tourne vers l’avenir

L’Echo, L’Etat belge entre au capital d’Ageas, le titre chute en bourse

Assuropolis, L’Etat belge acquit une participation de 6.3% dans le capital d’Ageas

Assuropolis, Baloise Insurance devient tout simplement Baloise

Baloise, La Baloise simplifie son monde des marques et se positionne pour l’avenir

Atlas Magazine, Top 10 most costly disasters in 2021

Assuropolis, Inondations: plus de 5000 dossiers introduits au fonds des calamités

Assuropolis, Top Employers Institute : huit compagnies d’assurance belges sont distinguées

What’s next for the insurance sector in 2022 ?

What are the key themes to watch in 2022? The Economic and Financial Division of ING Bank has released its projections. Let’s run through their analysis.

 

  1. Re-risking of portfolios amid market volatility and low interest rates
  2. Resilience in the face of Covid-19 and post-crisis shocks
  3. Sale of closed life books to continue
  4. UFR to remain stable
  5. Premiums and demand are set to grow
  6. Climate change and sustainability are key topics
  7. Solvency II framework to be amended
  1. Re-risking of portfolios amid market volatility and low interest rates.

The ongoing environment of low rates has been weighing heavily on insurers’ profitability, especially life insurers, with guarantee products suffering the most. In portfolio allocation strategies, Economic and Financial Analysis 2 November 2021 Article insurance companies have to find a balance between higher returns on capital, lower solvency capital requirement (SCR) and longer duration.

In order to boost returns, insurers have been vocal about their ongoing shift towards higher risk and less liquid assets, while at the same time being conscious of the capital charges these investments attract.

The following alternative asses classes could be insurers’ top picks for the purpose of optimizing their investment portfolio :

  • Mortgages – without attracting a penalising duration factor, these limited risk investments attract relatively low capital charges, providing insurers with an opportunity to invest in an amortising asset class with a natural interest rate hedge.
  • Private placements – tailor-made products that match the exact needs of both issuer and investor are relatively low risk and can provide insurers with a perfect match for their portfolio on relatively attractive terms.
  • Infrastructure debt – an asset class that is characterised by a very long duration, the favourable SCR treatment compensates investors for the absence of a secondary market with a hefty illiquidity premium, and it can also offer something of a sustainability factor.
  1. Resilience in the face of Covid-19 and post-crisis shocks

The crisis had a minimal impact on the capitalisation of insurers, as the European Insurance and Occupational Pensions Authority (EIOPA) reported an average Solvency II ratio of 235% for the end of 2020, only seven percentage points lower than in 2019.

Going forward, with all the measures taken to combat the pandemic and ongoing vaccinations, ING expects the performance of the Life segment to improve. In Non-Life, we are going to see some catch-up over the coming months as demand will increase for non-Covid-19 related medical care which was postponed, but they believe that insurers have sufficient reserves to absorb that shock.

  1. Sale of closed life books to continue

Insurance companies are dealing with numerous market challenges (such as low interest rates, Solvency II capital charges, an ever changing regulatory framework, etc) and are seeking to create value through both new business as well as through the optimisation of already existing books. Closed books can be managed in several different ways, be it through internal optimisation within the insurer, putting it in run down internally or outsourcing some lines of business to an external company, or completely offloading balance sheet exposure. In order to release capital and shift the focus onto new business, a lot of insurance companies have been vocal about their intention to sell closed life books which pose a significant profitability challenge.

While the market for closed books in the US and the UK is booming, the activity in the EU has not yet reached the same levels. However, the number of deals in the market across Europe continues to grow, with the Dutch insurers playing an active role. In spring 2021, Allianz sold 90,000 policies to Monument Assurance Belgium NV. The latest to announce was Athora Belgium seeking to acquire closed life book of NN Insurance Belgium with €3.3bn of assets under management. The deal is expected to close in mid-2022.

  1. UFR to remain stable

Changes to the Ultimate Forward Rate continue to have an impact of insurers’ Solvency II ratio. The UFR, being higher than rates observed in the financial markets, has a positive impact on insurers’ solvency position. For 2022, the UFR was fixed at 3.45%, reflecting the expected real rate and expected inflation. Despite the slight increase in rates in 2021, no upward revision to it is expected short term. Should the trend continue over the coming years, we could see a slight increase in the rate in the coming years. The annual change in the UFR is capped at 15bp, and therefore any upward revision would be limited.

  1. Premiums and demand are set to grow

Higher claims during Covid-19 could lead to higher premiums. As such, a lot of them are planning to use built-up reserves to curb premium increases. Increased risk-awareness during the pandemic pushed demand for insurance products higher. We can expect to see growth in sales of life insurance policies, in particular. It is expected that this product will be used more widely, for instance as part of employee benefit packages.

  1. Climate change and sustainability are key topics

Climate change is at the heart of the insurance sector for many reasons, having a profound impact on both the liability and the asset side of insurers’ balance sheets. The number of natural disasters has been steadily increasing over the last decades. Climate change has exposed vulnerabilities of P&C insurers and reinsurers in the wake of rising catastrophe claims through natural disasters’ impact on businesses (business interruptions) and homes (property damage and destruction).

One of the challenges of climate change is the systemic nature of the risk.

The interconnected nature of the world means that the consequences of natural catastrophes are spreading far and wide, and multiple claims can be submitted relating to one event, so called aggregation risk.

Insurers underwriting policy is always based off past claims experience, therefore it’s important for them to proactively re-evaluate the risks to be mirrored in their premiums. It is possible that new products will have to appear to reflect the complex nature of new risks, and insurers have to remain flexible in providing new underwriting solutions to maintain coverage ability.

Insurers are also taking active climate conscious actions by offering new innovative products to their customers. Be it a discount on motor insurance of electric vehicles or providing protection on wind and solar energy, insurers are participating in actions targeted at combatting climate change. The systemic nature of climate risk makes the need for global collaboration among insurers indispensable. Insurers need to study climate risks together to better understand them and provide customers with the best solutions.

The European Commission also disclosed that a review of the Solvency II framework will comprise a new requirement for a long-term climate change analysis as well as potential changes to the standard formula catastrophe risk module.

Another way in which climate change is increasingly important for insurers is the environmental impact of their investments.

Across Europe, insurers have over €10t invested in assets, and changes in their investment behavior can have a major impact on the market. As discussed above, insurers are looking to re-risk their portfolio, which is a perfect opportunity to take environmental considerations into account.

ESG-related infrastructure debt investment would be our top pick for insurers’ growing risk appetite, offering portfolio diversification, attractive return on capital, much needed duration and, at the same time, a positive environmental impact.

  1. Solvency II framework to be amended

On 22 September 2021, the European Commission adopted a comprehensive review of Solvency II. The review is centered around two main areas. First, the revision of the Solvency II Directive (Directive 2009/138/EC) and a proposal to introduce a new Recovery and Resolution Directive, establishing proper resolution procedures. The aim of the review is to strengthen European insurers’ contributions to the financing of the recovery, with many aspects of the framework coming into focus. The Covid-19 crisis highlighted the vulnerabilities of insurers in an environment of prolonged low interest rates and also showed that there is room to further strengthen crisis management tools amid great economic and market shocks, which could potentially lead to instability in the whole financial sector. The revision is set to release as much as €90bn of funds to contribute to the post Covid-19 recovery. The Recovery and Resolution of insurers is set to be strengthened based on the experiences of the Bank Recovery and Resolution Directive (BRRD) and regulation for the recovery and resolution of central counterparties (CCPRRR) but will take into account the specific nature of risks in the insurance sector and the primary need to protect policyholders.

Source : Publication by Marina Le Blanc, Sector Strategist, Financials at ING.

 

Financial results 3rd quarter of 2021

Allianz Benelux

Virtual image of the new HQ of Allianz Benelux

At the Benelux level, premium income increased by 1.6% (€2.8 billion). For the Life activities, it amounted to €1,544 million Euro, an increase of 1,7% compared with 2020 (€1,519 million). In Belgium, the premium volume decreased slightly compared to 2020, while in the Netherlands the increase is significant. The premium income of the Non-Life activities reaches €1,228 million in the Benelux. This represents an increase of 1,4% compared to 2020 (€1,211 million).
In Life, the operating result is €99.4 million, a decrease of 14,4% compared to 2020 (€116 million). This difference is mainly explained by an exceptional income generated in 2020. Non-Life operating income was €73.3 million (€126.5 million in 2020), due to the one-off effect of an intra-group reinsurance transaction. Life and Non-Life operating profit was €172.7 million (€242.6 million in 2020).
Net profit of Allianz Benelux was €102 million (€146 million in 2020) for the 3rd quarter of 2021.

 

KBC group

KBC group building entrance

KBC Group’s profit for the quarter under review amounted to €601 million, despite a one-off negative effect of €319 million related to ongoing sales transactions in Ireland. Total revenues increased on a quarterly basis, as higher net interest income, net fee and commission income and other net income more than offset the decline in non-life insurance results (negatively affected by the floods in Belgium) and the seasonal contraction in dividend income. Excluding non-recurring and non-operating items (including currency effects and bank taxes), costs remained virtually stable quarter-on-quarter.
Technical income from non-life insurance activities (earned premiums minus technical expenses, plus result from ceded reinsurance) contributed €174 million to total income (€1,884 million), down 18% quarter-on-quarter and 23% compared to the 3rd quarter of 2020. In both cases, the increase in earned premiums and the improvement in the reinsurance result were more than offset by a significant increase in technical expenses, as the quarter under review included €100 million of claims related to the severe floods suffered in some provinces of Belgium (note that after reinsurance, the net amount is about €79 million, of which €38 million above the legal limit (which is the ceiling introduced in the Belgian law on the intervention of insurers in case of very severe floods). Overall, the combined ratio for the first nine months of 2021 stands at 87%, which remains excellent, compared to 85% for the full year 2020.

 

Ageas group

Ageas logo

Ageas Group’s net income amounted to €568 million, supported by a strong performance in Life.
Net income in Insurance increased from €737 million to €777 million.
Non-Life net profit was €236 million compared to €311 million in 2020. And Life net income of €541 million compared to €426 million in 2020.
Group net income in the third quarter amounted to €161 million.
Group inflow (at 100%) increased by 11% to €31 billion.
Life outstandings (at 100%) increased by 9% to €25 billion, driven by a strong commercial performance across all regions. Non-Life inflow increased strongly to €6 billion, mainly driven by Belgium and the inclusion of Taiping Re. Third quarter inflow (at 100%) increased by 13% from €7.8 billion to €8.8 billion.

In Belgium, year-to-date inflow showed solid growth in both Life and Non-Life.
Life inflow has seen strong growth in unit-linked products (+46% compared to 2020), supported by commercial campaigns in the broker and bank network. Non-Life premium income grew by an exceptional 9% year-on-year, with all business lines showing an increase thanks to the joint efforts of AG and its distribution partners.

Keeping up with the market : End of the year 2021

Every month we help you keep up with the news of the Belgian insurance market.

Mergers & Acquisitions

Crelan and AXA Bank

(Het Nieuwsblad)

Crelan announced its intentions to buy AXA Bank 2 years ago. After a lot of turmoils, and waiting for the green light, first from the NBB, and then from the European Union, it seems that things are finally coming to an end. Indeed, the Central Bank of Europe has finally given its agreement to the merger of the 2 banks. On 1 january 2022, the merger will be effective and Philippe Voisin, CEO of Crelan, will officially be managing this new network of 900 agencies. This new organization has a new committee composed of 2 members of Crelan and 3 members of AXA Bank. Peter Devlies, current CEO of AXA Bank, will not be part of it.

 

Integrale

It seems that the twists and turns of the sale of Integrale are not yet coming to an end. Indeed, in September, we explained to you that MGEN had asked the court of Liège to cancel the sale of Integrale to Monument Re. The Walloon court dismissed the motion. However… another group of bondholders, assisted by the legal consultancy Deminor, is also requesting the annulment of the sale of Integrale to Monument Re before the corporate court in Brussels. In other words, to be continued…

 

Baloise and B’Cover

Baloise Insurance building

Baloise Group acquires B’Cover, an insurance expert for office and apartment buildings. Upon completion of the acquisition, B’Cover will be known as B’Cover by Baloise Insurance, but will remain an independent entity within the Baloise Group, and will operate as such, keeping the same product and range and employees.

More than 4,300 managers and owners of apartments and offices currently rely on B’Cover’s efficient and tailor-made insurance solutions. As a specialist, the company has been providing peace of mind to trustees, CPAs (condominium associations), condominium owners and tenants for years by offering all-inclusive packages.

Over the past 10 years, B’Cover has become a reliable name in Flanders with its all-in insurance for the building market. As soon as the takeover is finalized, Baloise Insurance wants to further expand the B’Cover by Baloise Insurance offer with its network of brokers in Brussels and Wallonia.

 

Partnerships & Products

Cyber Care

Cyber care by Proximus website screenshot

Proximus and AXA Partners signed a partnership in February of this year to develop the cyber risks assistance product: Cyber Care. For 4,99€ per month, Cyber Care offers 24/7 assistance to all family members living under the same roof to provide technical, legal, financial and psychological support when they spot suspicious behavior on the Internet or when they are victims of fraud. The product was launched earlier this year. After a successful test period, both companies decided to develop the product on a broader scale.
If a consumer feels that their identity or personal data is being used for fraudulent purposes, for example, they can call on Cyber Care’s teams for legal assistance and even psychological support if needed. The insurance also intervenes in case of bad experiences related to online shopping, such as non-delivery or non-conforming delivery of the product. This product also intervenes in case of online harassment and defamation. In this case, Cyber Care will provide legal and psychological support to those affected, as well as technical assistance to try to remove defamatory elements, whether photos or texts.

 

SwissRe and Baidu

Swiss Re and Baidu logos

Swiss Re, 1st reinsurer worldwide, has already given its opinion about the future of insurance: for them, partnerships with technological companies is key for a successful future. It is not just convictions, they recently signed a partnership with Baidu, the Chinese internet behemoth. The goal? Sharing their expertise in order to design innovative insurance products for autonomous car.

The 1st outcome if this partnership is the launch of an insurance product for the automated valet parking service “Apollo Valet Parking“, developed by Baidu. The next topics will be insurance innovation and risk management for autonomous driving IT platforms, intelligent dashboards and autonomous taxis.

 

 

Sources:

Main figures of the Belgian insurance market in 2020

Like every year, Assuralia gathers the main figures of the Belgian insurance market. What are the main figures of 2020?

2020 was a very special year: the world looked for a way out of the coronavirus pandemic, people have been unable to leave their homes for a long time and many sectors have suffered from the forced suspension of their activities. The Belgian insurance sector has held out against the coronavirus test. That results in a solvency ratio of 2 percent higher than last year. Its level is almost twice as high as required by the law. In conclusion, the sector was even more armed than the law requires to deal with the historic floods of 2021 (even if the impacts of this drama will only manifest in next year’s numbers).

Here’s the ranking of the insurance companies on the Belgian market by market shares.

Some figures : 

  • Total premiums (24.899 billion euros in 2020) down 2.3% (-4.8% in life, -2.3% in non-life).
  • The cost/collection ratio is 25.2% (10.7% commissions, 7% personnel costs, 7.5% other operating costs).
  • The net result in 2020 decreased from 2.46 billion euros (in 2019) to 1.81 billion euros.

 

 

Source :