OREANDA-NEWS. Fitch Rating says in a new report that it expects Austrian insurance companies to face further pressure on profitability, extending a decline seen since 2013. This is attributed to a low interest rate environment, which creates a difficult operating environment for insurers, especially for life insurance.

Fitch expects life insurance premiums to decline in 2016, after stagnating in 2015. Non-life premiums saw a moderate but steady growth over the last five years and Fitch expects continued growth for 2016. Non-life underwriting profitability has improved in recent years, mainly driven by shrinking insurance losses because of moderate catastrophe losses; however, Fitch expects lower overall profitability because of falling investment income.

Due to a further decline in market interest rates, the Austrian regulator has modified the rules for the required Zinszusatzruckstellung (ZZR), an additional reserving requirement introduced in 2013. As a result, we estimate total ZZR charges in 2015 to have increased to EUR180m from EUR70m. This will create further pressure on life insurers' profitability.