Insurance bonds in the spotlight – Sweet spot CEE?

Erste Bank Research Team Erste Bank

The European insurance sector is benefiting from the turnaround in interest rates. Higher bond yields are improving investment returns, whilst premium increases are more than offsetting claims inflation. The solvency ratios of the largest European primary insurers are mostly above 200%.

The CEE region offers above-average growth potential in the long term. Both insurance penetration (premium volume as a percentage of GDP) and insurance density (premiums per capita) are significantly below Western European levels. Premium growth correlates in the long term with GDP growth, which is structurally higher in Eastern Europe.

Benchmark-eligible Tier 2 EUR-denominated bonds with a clear CEE focus are rare. We consider them attractive due to their above-average solvency capital ratios and good growth prospects, as they offer high spreads in a peer comparison.

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Erste Bank Research Team

Erste Bank

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