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AM Best has affirmed its Stable outlook for Spain’s non-life insurance segment, citing a number of positive trends that are expected to help improve the sector’s performance.
These include the increasing prominence in health and catastrophic risks, which AM Best argues is reshaping the competitive landscape; the ongoing motor insurance pricing adjustments that are expected to reduce competition and protect technical margins, as well as the country’s consistent regulatory environment.
Growth opportunities in Spain’s non-life segment are mainly predicted to come from consolidation and merger and acquisition (M&A) activity.
The market remains highly concentrated, both by subsegment and constituent. In 2024, motor, health and multi-peril lines represented more than three quarters of non-life gross written premiums (GWP).
The ten largest groups accounted for more than two-thirds of the market share in the same period.
AM best expects premium growth to continue in 2025, although slightly below 2024, when GWP grew nominally by 8%. The health subsegment is expected to grow in 2025, in line with 2024 at high single-digit levels, fuelled by premium rate increases and rising numbers of insureds.
Catastrophe protection has also gained prominence in the Spanish market, with the 2024 Valencia’s catastrophic flash flooding – the DANA – underscoring the critical role of insurance and the government-mandated Consorcio de Compensación de Seguros (Consorcio) natural catastrophe scheme.
Spain’s non-life insurance profitability will likely continue to be challenged by increasingly volatile weather, as weather-related events become more frequent and severe.
Yet, the segment has implemented limited underwriting and pricing adjustment so far, analysts noted. Discussions continue regarding the potential increase of Consorcio support for weather-related events, which could reduce volatility.
Insurers also rely on commercial reinsurance to complement Consorcio coverage, reduce retention and cover risks that are outside the remit of the Consorcio.
Motor continues to be one of the most challenged subsegments, AM Best highlights. Car registration registrations have not yet recovered to pre-pandemic levels, causing an aging of the vehicle fleet and an increase in demand for insurance products with reduced coverage.
AM Best expects motor technical profitability to remain under pressure in 2025 primarily driven by increasing claims costs, including those for repair and replacement.
However, significant premium increases in 2024 and projected for 2025, are expected to partially offset these pressures, according to the rating agency.
AM Best is also expecting Spain’s insurance regulatory environment to remain consistent and in line with the rest of the EU.
The latest developments include the entry into force of the Digital Operational Resilience Act (DORA) in January 2025, and the adoption of the EU Artificial Intelligence (AI) Act in February 2024, expected to be fully enforced by 2025-2026.
AI is expected to be a top priority for most insurers, aiming to enhance efficiency and customer experience.
Additionally, the implementation of the revised Solvency II regime is scheduled to take place in 2027, potentially coinciding with the transposition of IFRS 17 into Spanish national accounting standards.
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