Moody's keeps Dutch outlook at negative

The reduced attractiveness of life insurance products, as well as persistent high constraints on insurers' margins, mainly due to low interest rates have contributed to the negative outlook.

Benjamin Serra, analyst and assistant vice president, Moody's explained: "As Moody's outlook for sluggish growth in the macro-economic environment is unchanged, we believe the demand for both life and non-life insurance products will remain constrained.

"In particular, the demand for mortgage-related savings products, which represent an important part of life insurance production, will remain subdued, as the economic environment is not favourable for an increase in mortgage production."

Moody's anticipates the low interest rate environment in the life insurance market to continue to place insurers' margins under pressure, especially in relation to the high level of guarantees offered for many years by Dutch life insurers.

Moody's said it expects the price competition to intensify in both non-life insurance and life insurance, as a consequence of the increasing weight of direct insurance; and the growing pressure of consumers' associations on financial institutions.

It added: "The race for economies of scale is also a feature of many Dutch insurers aiming to mitigate declining profitability, although this actually fosters increased competition and feeds a vicious circle, as it ultimately contributes to additional margin pressure."