The Austrian Insurance Industry from a Financial Stability Perspective: an Analysis of the Period from 2002 to 2008

This study, which arose under the OeNB’s expanded financial stability mandate, provides the reasoning for an integrated approach to financial stability analysis. It takes stock of the Austrian insurance sector and provides an assessment of the sector in respect of financial stability. This study is based on data provided by the Financial Market Authority (FMA) that the OeNB periodically analyzes under its expanded financial stability mandate. In order to monitor longer-term developments and trends, the period under review ranges from 2002 to 2008. We find that concentration in the Austrian insurance market and competition have increased and that insurance companies have made efforts in cost and claims management. Compared with the rest of Europe, the Austrian life insurance market still has growth potential. Austrian insurers have diversified their quite considerable debt security portfolios at an increasingly international level. Following the outbreak of the U.S. subprime crisis, profitability fell sharply after having previously grown at a steady rate on the back of a favorable financial market environment, a positive insurance claims trend and Austrian insurance companies’ expansion in Central, Eastern and Southeastern Europe. Although the Austrian insurance industry’s financial ties with the banking sector deepened on the whole, they remained at a relatively small scale.