Unlike the banking sector, which needs to lend money for profitability, life insurance companies only obtain liquidity. This allows them to make long-term investments and to earn higher profitability, which they can pass on to customers..
What does this translate into? Generally, much more attractive returns than those generated by banks, which are a far cry from the 1 % in guaranteed savings offered by some insurers.
Some considerations on the solvency of insurers in Spain
Historically, savings plans have been offered by banks, so it is logical that many of our clients ask themselves whether insurance companies are solvent. However, the answer is simple and clear:
The recommended solvency ratio is 150 %. However, most companies operating savings and investment products exceed the 200 % solvency ratio, the industry average being almost 250 %. The sector is therefore in good financial health.
In addition, in the event of the bankruptcy of an insurance company, it is the Insurance Compensation Consortium, The Ministry of Economy, which would attend to payment obligations and compensate customers for any losses they might incur. These functions were previously assumed by the CLEA (Comisión Liquidadora de Entidades Aseguradoras). Unlike the Deposit Guarantee Fund, there is no limitation on the amount.
Solvency II and strict control measures for insurers
Insurance companies are subject to the same control as banks. following Solvency II, the framework for the regulation and supervision of insurance and reinsurance companies established in the European Economic Area (EEA).
Thanks to the regulatory framework that aims to protect the insured, the insurers The Spanish (and European Union) have strict control and supervision measures in place.
It establishes quantitative (Pillar I), qualitative (Pillar II) and reporting and market transparency (Pillar III) requirements. As set out in this Pillar III, insurers must publish the Solvency and Financial Condition Report (SFCR) once a year., (see also the report of the European Commission's European Commission).
On another front, the Directorate-General for Insurance and Pension Funds (DGSFP) supervises the products marketed by insurance companies, the investments they make and the contractual information, in order to ensure maximum transparency for customers.
What is the solvency of Spanish insurance companies?
As we have seen, the Solvency II regulatory framework places a premium on transparency, which is why insurers have been required to publish their Solvency and Financial Condition Report for five years now. Since then, the Afi consultancy firm has compiled an interesting report analysing the situation of 18 large institutions., The publication of this data by insurance companies is not only an exercise in transparency, but also a “thermometer” of where these companies stand with respect to the average or recommended solvency ratio. The publication of this data by insurance companies is not only an exercise in transparency, but also a "thermometer" of where these companies stand with respect to the average or recommended solvency ratio.
The latest report is for 2020 data, The year in which the pandemic broke out. Despite the instability it has caused in all areas, it is determined that in this one “it has not made a dent”.”, The companies analysed have sufficient capital. In fact, they have double the capital strictly required by regulation.
The solvency ratio of the aggregate of institutions is 247 %, although with a significant dispersion between a minimum of 154 % and a maximum of 483 %. The sector average is 246 %.
Which are the most solvent companies?
Solvency ratios by individual institutions (2020). Graph extracted from the Api report Leading Spanish insurers: improving profitability and maintaining solvency in the year of the pandemic.
Insurers' savings plans: profitability coupled with solvency
At a time when banks are not able to offer guaranteed savings products with attractive returns, insurance companies have provided an alternative to the traditional savings products. offer attractive interest rates for your customers. As we have seen, they are even more solvent than banks. In fact, some of the insurance companies in our portfolio offer guaranteed savings with returns in excess of 1 % net. Yes, in times of low interest rates, this is something that is happening with insurance company savings products.
PIB Group Iberia is well acquainted with the different proposals, as we work with around twenty entities. In this way, our Savings and Investment Department is dedicated to analysing the best savings products, with the aim of offering you the most advantageous and adapted to your profile (from more or less risky to completely conservative).
At PIB Group Iberia we advise you and help you choose the best savings product at no cost to your pocket. The reason is that the companies themselves remunerate us for bringing in new customers, so you don't have to pay anything for our help. All this with the independence that characterises insurance brokerages.
We have been helping hundreds of clients in this way for decades, consult us without obligation.
