Report on the Impact of Inflation on the Insurance Sector

In the current macro-economic environment, one of the major concerns for the insurance market is the significant increase in inflation experienced since spring 2021. The high uncertainty and the slow recovery after the Covid-19 pandemic outburst in 2020, followed by the Russian invasion of Ukraine in February 2022, have reduced the outlook for growth in Europe and increased downside risks for the future course of the economy. All these events generated and/or amplified existing trends and problems like supply chain disruptions, a mismatch of supply and demand for goods and services, resource limitations raising commodity prices, deglobalisation and a decline in the working age population. The combination of these developments has caused a switch from a long period of low inflation and low interest rates to a new economic environment dominated by stubbornly high inflation and increasing interest rates.

Against this background, the aim of this report is to analyse the impact of inflation on the insurance sector as observed so far (backward looking perspective) and to assess potential risks and vulnerabilities given the uncertainty of how inflation will develop in the short-, medium- and long-term (forward looking perspective).