Europe in focus
No. 3/2000
Europe in focus: Non-life markets undergoing structural change
The new edition of sigma examines the structural change in non-life insurance with a view to the deregulation and liberalisation process in Europe. The study focuses on the changes in the corporate landscape. Following the wave of consolidation, in which the big European insurers were able to gain substantial market share in all European markets through acquisitions and mergers, the coming years should mark the age of information technology. The after-effects of liberalisation in the insurance industry are a central issue for companies worldwide; the results of this study are thus not only interesting for European companies, but also for the insurance industry in general.
The previously heavily regulated markets were particularly affected by price competition in the wake of deregulation and liberalisation. In ten of the fifteen EU countries, pressure on premiums has increased in the key motor insurance sector. Given this environment, premium volume has yielded only slight growth whilst profits are being eroded.
A look at the changes in market share of the major European insurance groups, national providers and foreign insurers gives the following results: The major European groups have increased their market share in the six biggest markets from 18% in 1990 to 39% in 1998. This rise is due almost exclusively to external growth through mergers and acquisitions. Market share was increased at the expense of both national insurers and foreign providers. Although national insurers were able to make up for a small part of this loss through organic growth, foreign providers were not as successful.
A detailed look at the mergers and acquisitions made shows that the value of the transactions in the six largest Europe non-life markets rose from USD 1.5 billion in 1992 to USD 35 billion in 1997. Until 1995, smaller transactions dominated the scene. Since then, the average volume per transaction has risen markedly. Whilst mergers and acquisitions were mainly domestic affairs in the eighties, cross-border deals gained in importance in the nineties: In 1999, for example, more than 50% of transactions were of a cross-border nature. The general consensus is that M&A activity on the part of the major groups is due more to strategic considerations than to a drive for efficiency.
The implementation of new technologies heralds a new phase of structural change, in which the insurers traditional value chain is increasingly being called into question. New technologies offer previously unknown possibilities for automating routine tasks such as administration. Outsourcing will gain far more importance as the new technologies will make it easier to deconstruct the value chain. The internet also opens up a new distribution channel in direct competition with the traditional method of selling via agents and independent brokers.
On the whole, it can be said that the European insurance industry faces still further change which promises to radically transform both the corporate landscape and the way in which insurance is provided.
This publication can be downloaded in English, German, Spanish, Italian and French.
Download "Europe in focus: Non-life markets undergoing structual change"
Download "Europa im Fokus: Struktureller Wandel in der Nichtleben-Versicherung"
Download "Europa en la mira: el cambio estructural en el seguro no-vida"
Download "Focus sull'Europa: gli effetti del cambiamento strutturale nell'assicurazione danni"
Download "L'Europe en point de mire: mutation structurelle de l'assurance non-vie"
For further questions and copies of Chinese or Japanese versions, please contact sigma@swissre.com.
