The Luxembourg Insurance and Reinsurance Association (Aca) published its 2021 results on Monday 4 April. In his commentary on the past year, Marc Lauer, who was president of Aca until 24 March this year, noted a positive year, marked by "record premium income in both life and non-life insurance". Lauer, who was succeeded by Christian Gibot, CEO of Cardif Lux Vie is now vice-president of the association.
The Aca annual report observes a correlation between the increase in the number of Luxembourg residents and the growth of the Luxembourg market for non-life insurance products. This segment enjoyed a growth of 3% and collected the sum of €1.1 billion in premiums by the end of December 2021. The two main lines of business were automobile and property damage products, which grew by 2% and 1% respectively.
The results of the non-life sector are all the more positive in view of the events of 2021, as Marc Lauer notes. "In view of the good performance of the financial markets, the results will also be good, despite a significant loss experience, essentially borne by Luxembourg non-life insurers after the heavy floods of last July," he said.
The increase in interest rates which was expected to be the consequence of any inflationary surge (...) will above all have a significant negative impact on the valuation of bond portfolios held by insurers.
Still on the local market in 2021, the market for life insurance products witnessed €1.9 billion in premiums, an increase of 28% compared to 2019. Life insurance products with a guaranteed rate of return decreased by 14% compared to 2019, representing only 46% of life insurance written in Luxembourg. According to the report, a growing share of insurance professionals have decided to stop promoting such products due to the low interest rate in 2021. At the same time, unit-linked products have increased by 45% between 2019 and 2021.
Inflation and "over-regulation
While 2021 ended on a positive note for insurers and reinsurers, the Aca vice-president points to a few challenges for the industry he represents. "The first challenge is inflation," he explains. “The increase in interest rates that was expected to be the consequence of any inflationary surge.…will above all have a significant negative impact on the valuation of bond portfolios held by insurers.”
In the eyes of Lauer, "over-regulation" is putting more and more pressure on small and medium-sized companies operating in Luxembourg. Citing the Solvency II reform and the introduction of ESG rules as examples, Lauer says he deplores "a very heavy administrative burden while the benefits for policyholders and those insured remain limited". He explains that he is in favour of a rapid transposition by Luxembourg of all international rules, "without adding a layer of national regulation".
Another obstacle to the evolution of the Luxembourg industry Lauer wants to tackle is professional secrecy in which he calls "a remnant of another era in an international environment now marked by fiscal transparency and the exchange of information between authorities".
Digitalisation and the challenge of recruitment
Lauer points out that the sector's digitalisation is a real catalyst for competitiveness between the various international markets. “Aca's demand is certainly not to abolish insurance secrecy, but at least to adjust it to take account of today's political and technical realities,” he says.
We are increasingly aware that our traditional recruitment pool, i.e. the Greater Region, is gradually drying up and that new teleworking habits are motivating fewer and fewer young people to move to Luxembourg.
Digitalisation remains the cornerstone of the industry's future, in the eyes of Aca, which can only develop "with highly competent people". In this perspective, "we are increasingly aware that our traditional recruitment pool, i.e. the Greater Region, is gradually drying up and that new teleworking habits are motivating fewer and fewer young people to move to Luxembourg," says Lauer.
In addition to the slowdown in remote working, in the absence of political support to adapt the general framework of telework as well as the tax and social security rules, the former president of Aca concludes that "the attractiveness and competitiveness of the Luxembourg financial centre may suffer".
This article was first published in French by Paperjam and has been translated by Delano.