Economic, regulatory and market forces are testing the resilience of the European nonlife insurance sector, according to a report by A.M. Best Co. Inc.

Low interest rates are putting pressure on insurers' investment results, Best noted in the report, “European Non-Life Sector Approaches Economic, Regulatory Turning Points.”

And insurers' underwriting results also are under strain because of flat to downwards pricing trends, it said Monday.

Slow economic growth in many of Europe's leading economies has increased the threat of a double-dip recession, Best noted, and exacerbated the sovereign debt crisis in several eurozone countries including Greece, Ireland, Italy, Portugal and Spain, Best said.

While many European insurers have reduced their exposures to Greece, Ireland and Portugal during the past year, companies with exposures to Italy and Spain suffered falls in their risk-adjusted capitalization under a stress test performed by Best.

A worsening economic environment could negatively affect insurers, Best noted.

There is continued uncertainty about regulatory changes, in particular Solvency II, in Europe, Best noted.

Any delay to the start of Solvency II, slated for 2013 but likely to go into effect in 2014, likely would benefit smaller insurers that face the challenge of meeting the new capital requirements or devising internal capital models, Best said. But larger companies “may chafe at the delay after marshalling resources to comply with Solvency II,” Best said.

Efforts to implement International Financial Reporting Standard 4 for insurance may overlap with Solvency II, Best noted. Insurers likely will need to start using the new standard from the International Accounting Standards Board in 2014 ahead of a launch date of 2015, it said.

There was modest growth in several large European nonlife insurance markets in 2010.

The German nonlife market saw gross written premiums increase 0.9% to e55.2 billion ($73.91 billion), according to the report.

In France, gross written premiums grew 1.5% to e45.7 billion ($65.72 billion) in 2010, according to the report.

And in Spain, despite “a challenging economic environment and ongoing price competition,” gross written premiums increased 0.2% to e31.8 billion ($42.73 billion), the report noted.

In Italy, however, nonlife gross written premiums fell 2.4% to e35.9 ($48.24 billion) billion in 2010.