The resurgence of insurance products in Spain

The resurgence of insurance products in Spain

Fecha: noviembre 2023

Daniel Manzano

Insurance sector

SEFO, Spanish and International Economic & Financial Outlook, V. 12 N.º 6 (November 2023)

In what looks to be the tail end of monetary policy tightening by central banks, the insurance business in Spain is staging spectacular growth in revenue (premiums), fuelled by life insurance products. Yield curve normalisation over the past year has created the conditions, previously absent, for renewed development of traditional life and savings products, having languished for many years against the backdrop of zero or negative rates. These products have also benefitted from the banks’ strategy of keeping rates on their deposits low until now. With rates now looking more likely to stay high for longer, momentum in these products is expected to continue. While further tightening is not anticipated, the slow reduction in inflation from current levels means the ECB is now expected to keep its benchmark rates at current levels until midnext year, creating optimum conditions for business development in the life segment for the coming quarters. As a result, total annual premiums across all insurance businesses could hit a range of 75-80 billion euros in 2023 and 2024, which would mark growth of 15%-20% from 2022 levels. Moreover, business conditions look set to remain attractive for even longer, having left behind the era when interest rates of zero per cent thwarted any chance of growth. Nevertheless, from a broader perspective, the sector is likely to suffer, particularly in the non-life business, from the economic slowdown and high costs of claims in the motor insurance segment.

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