Italian life insurers credit negative in January 2023

The Associazione Nazionale fra le Imprese Assicuratici (ANIA), Italy’s insurance association, has released data this month showing that life insurers’ cash outflows from traditional guaranteed and unit-linked savings policies exceeded inflows in January 2023, a credit negative for insurers.

This is the first net outflow since 2012, when the Eurozone crisis occurred.

Net outflows mean that the volumes of assets and reserves managed by insurers will decrease. This will lower insurers’ profits which are mostly made up of fees charged from policyholders’ reserves.

The ANIA has said that the number of life insurance premiums written fell three per cent in January 2023, compared to the same month in 2022, whereas withdrawals increased 48 per cent over the same period. This led to a net outflow of €700 million, the lowest level since December 2012.

Additionally, the proportion of unit-linked premiums fell to 21 per cent of total life premiums in January 2023 – it was 39 per cent in January 2022.

Investor service Moody’s believes that this data was influenced by Eurovita S.p.A’s capital shortfall, which was made public on 21 December 2022. This prompted a high number of withdrawals from Eurovita in January until 7 February, when Italy’s insurance supervisor had to suspend redemptions on its savings policies after putting it into provisional administration on 31 January.

Higher outflows were also partly due to the increased number of policyholders redeeming traditional guaranteed savings policies earlier than anticipated to increase their liquidity because of the current levels of high inflation.

Also, there has been a decrease in the number of premiums written – a trend that started in early 2022.

Life insurers also face competition from other savings and banking products that are offering higher deposit rates or direct investments in Italian government bonds (BTP). Competitive investment solutions are likely to continue to affect insurance inflows. Especially as in Italy there are no penalties on early withdrawals from traditional life products, meaning policyholders can reallocate their savings.