The very good results in Luxembourg’s non-life insurance sector were not enough to offset the sharp decline in life insurance business, both locally and internationally, last year. Photo: Shutterstock

The very good results in Luxembourg’s non-life insurance sector were not enough to offset the sharp decline in life insurance business, both locally and internationally, last year. Photo: Shutterstock

In 2023, insurers that are members of the Aca trade association saw their premium income fall by 6.1% to €37.8bn. Growth in non-life insurance is outpacing the life insurance market.

The publication of the 2023 annual report by the Luxembourg Insurance and Reinsurance Association (Aca) foreshadowed how the year shaped up for the sector. Although the Aca’s figures are based solely on data provided by its members--unlike those of the regulator, the Supervisory Authority for the Insurance Sector (CAA)--they cover roughly nine-tenths of the market.

And in view of the figures published by Aca, we should be prepared for a paradigm shift: life insurance is in the process of handing over its status as the driving force behind the business in the grand duchy to non-life insurance. In 2023, life insurance premium income reached €19bn, down 17.5% year-on-year. At the same time, premiums written by non-life insurance rose by 9.2% to €18.8bn, virtually on a par with life insurance. Aca blamed this shift partly on the general macroeconomic climate, with “inflation playing an important role in these changes”.

To get a better idea of the dynamics, in 2019, life insurance premiums represented €28.2bn and non-life insurance premiums €12.4bn, i.e., less than half. The former fell by 33%, while the latter rose by 51%.

What has not changed is the international nature of the market. Of the €19bn in premiums in the life insurance sector, €17.7bn came from abroad, mainly from the EU market, compared with €1.3bn from the domestic market. In non-life insurance, the scale is the same: €17.4bn versus €1.4bn.

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Poor performance in key international markets

The poor results for life insurance can be explained by developments in the main target markets. For Aca members, France remains the dominant market, accounting for 47% of premiums written. In France, the year-on-year decline was 23.9%. The other three key markets also fell sharply: -37.7% in Germany, -32.8% in Portugal and -13.8% in Belgium.

On the local market, premiums were down 14.4%. “The decline was more pronounced for unit-linked products, which fell by 28.3%, compared with a more modest 2.1% fall for guaranteed-return products”, Aca stated. “A closer look reveals a 7.1% increase in the proportion of guaranteed-rate products compared with the previous year, which accounted for 57.1% of total premiums for the year.” Another notable development was the decline in personal insurance, which dominated the market (down 26.9% to €762m), in favour of group insurance (up 11.1% to €568m).

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Boom in non-life insurance

While demand is falling for products that are above all savings products, whose performance depends on the financial markets and in particular the bond markets--highly volatile markets which, in the case of bonds, are underperforming--demand is exploding for non-life insurance products.

In 2023, this sector saw an increase of 15.8% in premium income, “demonstrating its persistence after the significant gains of 23% in 2021 and 18.9% in 2022”, said Aca. The general liability and property segments accounted for 80% of direct premiums collected at the end of the year. The growth in property premiums over the year undeniably reflects sustained demand in the market, resulting from the rise in claims and natural disasters, which is both encouraging people to take out better insurance and driving up premiums.

On the local market, growth was robust: +5.5% to €1.3bn in direct insurance premiums. The sector was driven by motor and property insurance products, which grew by 4.4% and 6.4% respectively.

Assets under management stable

Assets under management rose by 2.2% to €222.2bn.

Most of this total, €175.2bn, is tied up in unit-linked products, in which the market risks are borne by the policyholder. The proportion of traditional products--in which the insurer takes the risk--continues to fall, to €46.3bn. The proportion of assets relating to pension funds remains marginal, at €700m.

As for reinsurance activities, we will have to wait a little longer for the final business figures for 2023. Last July, Aca reported a €1bn increase in premiums for its members, for a total of €13bn to €15.6bn.

Originally published in French by and translated for Delano