Norwegian property/casualty (P/C) insurance shows strong profits and disciplined underwriting, but climate risks take center stage after extreme weather events. The Norwegian P/C insurance sector has a strong track record of profitability even during recent economic and climate events, with support from disciplined underwriting and solid investment yield. However, S&P Global Ratings expects the harsh winter across Norway in 2023 and early 2024 to prompt insurers to take proactive measures, including adjusting rates and coverage options.
Despite weather-related pressures, we expect the P/C market's profitability to remain stable over the next two years. In 2023, we estimate the sector's net combined ratio at 93.8%, up from 87.8% in 2022. This deterioration in performance is largely attributed to increased claims from an unusually harsh winter, which impacted the loss ratio in 2023 and is expected to affect results in 2024. Despite this, we expect the sector to remain profitable in the coming years, with an anticipated combined ratio of 93%-95%.
The market saw higher losses in 2023 due to severe weather events like landslides in Halden, the storm Hans, and heavy rains in Eastern Norway. While storms and floods are covered by the Norwegian Natural Perils Pool and individual reinsurance, weather-related claims outside this scheme have increased, impacting the insurers directly, such as water damage from frost and excess snow resulting in a higher frequency of motor-related accidents. However, we expect claims to stabilize in the second half of the year.
We forecast a return on equity of 13%-14% for the Norwegian P/C sector over the next two years, slightly lower than the historical five-year average. We anticipate gross premiums written to grow by about 4% in 2024, with investment yields expected to remain robust. This strength is supported by the sector's significant investment in fixed-income securities, though the relatively large appetite for equity holdings introduces some earnings volatility for insurers.
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| Norway--Forecast summary | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2022 | 2023 | 2024f | 2025f | 2026f | |||||||||
| Nominal GDP (bil. NOK) | 4,324 | 5,705 | 5,304 | 5,173 | 5,363 | 5,540 | ||||||||
| CPI growth (%) | 4 | 6 | 6 | 3 | 2 | 2 | ||||||||
| Gross premiums written (bil. NOK) | 72.3 | 78.2 | 84.8 | 88.1 | 91.7 | 95.3 | ||||||||
| Insurance penetration (%) | 1.7 | 1.4 | 1.6 | 1.7 | 1.7 | 1.7 | ||||||||
| NOK--Norwegian krone. f--Forecast. | ||||||||||||||
Related Criteria
- Insurers Rating Methodology, July 1, 2019
- Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
Related Research
- Insurance Industry And Country Risk Assessment Update: July 2024, July 11, 2024
- Full Analysis: Norway, March 11, 2024
This report does not constitute a rating action.
| Primary Credit Analyst: | Sachin Bhojani, London; sachin.bhojani@spglobal.com |
| Secondary Contact: | Mark D Nicholson, London + 44 20 7176 7991; mark.nicholson@spglobal.com |
| Research Contributor: | Anisha Tole, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
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