The intra-European cross-border insurance market: some insights
Recently, EIOPA published its 2021 Annual Insurance Overview together with updated statistics. The statistics included for the first time for the EEA “Cross-border premiums” allowing for insights on the cross-border activity of insurers both regarding life and non-life insurance business on a freedom of services (FOS) or on a branch basis. We analyzed these cross-border insurance data especially in the context of the current Solvency II review, as Solvency II is a Single Market directive. The establishment of the Single Market for insurance allowing unimpeded cross-border sales and establishment did not come about easily. It started for direct insurance with the adoption of the first non-life insurance directive 73/239/EEC, applied on 27 January 1976. The first life insurance Directive, 78/473/EEC, was applicable as of 2 June 1980. These timid steps were further completed, among others, with the third non-life Directive 92/49/EEC and the third life directive 92/96/EEC applicable as of 1 July 1994. Since then, nearly 20 years passed by.
The first important conclusion is that of the 2837 insurance undertakings active in the EEA subject to Solvency II in 2020, 29% are effectively writing business cross-border. That is nearly 1 in 3.
Secondly, each EEA country is home to insurance undertakings engaged in cross-border business, and countries of destination are not just only a few neighboring countries. As such, cross-border insurance is a Europe-wide phenomenon, not limited to a few Member States. These findings underline the success of the Single Market project and the need to jealously preserve its achievements.
True, the breadth and depth of the business may differ as more than two-thirds of these 821 insurers active cross-border originate from five countries. Luxembourg (164), Ireland (135), Germany (91), Malta (56), and The Netherlands (53): these are in 2020 the most popular home Member States, i.e. for non-life insurance the Member State in which the head office of the insurance undertaking covering the risk is situated or the Member State in which the head office of the insurance undertaking covering the commitment is situated in the case of life insurance (Article 13(8) of the SII directive).
Thirdly, cross-border insurance business now makes up 7% or 90 billion euro of the 1.39 trillion Euro insurance business in 2020 (without the UK). This figure however does not include freedom of establishment business via local subsidiaries, nor does it include reinsurance business.
Lastly, more than half of the cross-border business is not life but non-life insurance. EIOPA’s data do not (yet) give further details on the lines of business of this cross-border business so it is hard to conclude whether these are mainly commercial or retail lines.
Diving one level deeper, of the total EEA non-life insurance business of 524 billion Euro GPW, 9% or 48 billion euro is cross-border business. More than half of that 48 billion Euro non-life cross-border gross written premiums is written by insurers from 3 countries: Ireland, Luxembourg, and Belgium. Over half of the cross-border non-life insurance premiums are directed towards Germany, France, Italy, and the Netherlands.
On the life insurance side, of the total 866 billion Euro EEA life insurance business, 5% or 42 billion euro is cross-border. Irish and Luxembourgish insurers counts for more than 80% of the cross-border life insurance business. 60% of the total cross-border life insurance premiums are bought in Italy and France.
Of the combined inward and outward cross-border business life and non-life insurance together, the highest traffic is from Ireland (outward) to Italy (inward), followed by business from Luxembourg to France and business from Ireland to Germany.