Insurance in the Netherlands

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On the other hand, the Dutch insurance market is one of the most open markets in the world, mainly due to its liberal regulatory environment and its considerably open distribution structure. As a result, the absolute and relative number of market participants is overwhelming. With “only” 16 million inhabitants in the Netherlands, no less than 786 non-life-insurers and 247 life insurers have licenses to operate in the Dutch market. The fact that the Dutch rank sixth globally in terms of per capita insurance premiums paid is another explanation for the overwhelming number of participants. However, coming from an era of “unlimited exuberance,” relatively flexible regulation, and strong fiscal incentives for life insurance business, insurers now have to adjust to a business environment that has changed significantly.

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International Insurance Markets

Insurance in the Netherlands 



International Insurance Markets

Insurance in the Netherlands 

International Insurance Markets

DNB. De Nederlandsche Bank (The Dutch Bank).

International Insurance Markets

Insurance in the Netherlands 

y Insurance in the Netherlands: Market Structure and Recent Developments

Alfred Oosenbrug

Economics, Finance & Insurance Centre (EFIC) AvisO Finance & Insurance Consultancy


The insurance industry in the Netherlands has a long and rich history. The founding father of modem life insurance mathematics, Johan de Witt, was a famous Dutch statesman. Thanks to the famous Dutch business sense, several insurance groups from a country as small as the Netherlands today are among the top global players in the worldwide insurance market.

On the other hand, the Dutch insurance market is one of the most open markets in the world, mainly due to its liberal regulatory environment and its considerably open distribution structure. As a result, the absolute and relative number of market participants is overwhelming. With “only” 16 million inhabitants in the Netherlands, no less than 786 non-life-insurers and 247 life insurers have licenses to operate in the Dutch market. The fact that the Dutch rank sixth globally in terms of per capita insurance premiums paid is another explanation for the overwhelming number of participants. However, coming from an era of “unlimited exuberance,” relatively flexible regulation, and strong fiscal incentives for life insurance business, insurers now have to adjust to a business environment that has changed significantly.

This chapter begins with a short overview of the long and rich history of life and non-life insurance in the Netherlands, followed by a review of recent developments in the domestic market. A detailed overview of the current market is then provided, focusing on the market for life insurance policies; the market for non-life insurance policies; and the existing distribution system for life and non-life policies.


The insurance industry has a long history in the Netherlands going back to the end of the Middle Ages (Van Bameveld 1984; Bos 1998). The history of non-life insurance even goes back to the eighth century when the first occupational guilds were formed (Oosenbrug 1999; Van Bameveld 1984). The guild members promised each other mutual assistance in times of adversity and compensated their members for losses caused by the perils of the sea, fire, flood, accident, or cattle thievery. Especially after the Reformation, with its iconoclasm, the financial support of sick guild members and the widows of former guild members became an important part of the guilds’ roles.

Before the Reformation, the largest part of the revenues of the occupational guilds was spent for religious purposes such as, maintaining special guild altars or special guild chapels in the parish churches, reading masses for peace of mind of deceased guild members, and worshiping the patron saint (Bos 1998). With the arrival of the Reformation, all those religious activities of the occupational guilds were forbidden; many of the guild altars and chapels in the parish churches were destroyed, along with many of the until-then usual images of (patron) saints. From then on, it was legally no longer possible to spend the available funds of the occupational guilds for religious purposes, so the use of the funds available shifted from financing religious activities to financing “mutual” assistance to poor or disabled guild members and widows of guild members.

The Reformation gave an important impetus to the guilds’ social (security) role. In the course of time it became common to put aside the money earmarked for mutual financial support in separate sick, burial, and widows’ clubs (Oosenbrug 1999; Gales and Van Gerwen 1988).

  1. Life Insurance in the Netherlands1

The Middle Ages

In 1345, Willem V issued life annuities to finance his budget deficits (Stamhuis

  1. . In the course of the fifteenth century, issuing annuities to finance municipal budget deficits assumed large proportions. The structure of the financial instrument used to finance the governmental and municipal deficits was the same as the structure of the financial instrument already used in the ancient Greek municipal state Milete in 205 BC (Oosenbrug 1999). The amount of the annuity was independent of the age of the subscriber; nevertheless, the annuity had to be paid out as long as the subscriber was alive (Van der Grinten 1931; Oosenbrug 1999). So those medieval annuities were really true precursors of modem life annuity contracts, although the “premiums” paid still were not founded on any actuarial technique.

Origin of Modem Life Insurance Business

In 1671, the Dutch statesman Johan de Witt published his well-known “WAERDYE Van LYF-RENTEN Naer proportie van LOS-RENTEN” (“The value of life annuities in proportion to fixed annuities”).2 Although Domitius Ulpianus had done the same at the end of the second century, De Witt was the first in the modem world to introduce age-dependent survival rates in calculating the value of a life annuity (Van der Grinten 1931).

With the ideas in his pamphlet, Johan de Witt became the founding father of modem life insurance mathematics. Nevertheless, it was not until 1762 that the first scientifically based life insurance company was founded, the English Society for Equitable Assurance on Lives and Survivorships (Van Bameveld 1984; Oosenbrug 1999). In the Netherlands itself, only in 1807 was the first scientifically based life insurance company founded, the Amsterdam-based Hollandsche Societeit van Levensverzekeringen. While the Equitable eventually went into run-off, the Hollandsche Societeit is still going strong. After some mergers, it is now part of Delta Lloyd, the fully owned Dutch subsidiary of the English Aviva Group. Delta Lloyd ranks fourth among Dutch insurers in worldwide premium income earned (AM Jaarboek 2004).

Nevertheless, during the nineteenth century, the Dutch life insurance market was still dominated by traditional funeral funds, selling only funeral insurance policies with a small sum assured (Gales and Van Gerwen 1988; Van Gerwen and Verbeek 1995; Oosenbrug 1999). At the top of their penetration rate, in the 1880s, far more than half of the total Dutch population was insured with one of the approximately 600 funeral funds. Until the end of the nineteenth century, those funds still did not use age-dependent mortality rates to calculate their premiums and did not form sound financial reserves to cover their liabilities. It was not until the second half of the nineteenth century that scientifically based funeral insurance policies came within reach of the general public. Specialized funeral insurance companies and modem funeral funds were founded, and traditional funeral funds were transformed into insurance companies or modem funds.

Rise and Ripening of Modern Life Business

By the end of the nineteenth century, modem life insurance companies began to actively promote their products and the number of players and the diversity of life insurance products increased. In 1880, a long period of strong market growth began, interrupted only by a small dip in the first years of World War I.

The total sum assured grew from dfl. 100 million (€45 million) in 1880 to dfl. 2 billion (€900 million) in 1920 and dfl. 8 billion (€3.6 billion) in 1945 (Oosenbrug

  1. . Markedly, more than half of the growth from 1920 to 1945 was during World War II (WWII). Because of the general scarcity of goods, people did not have alternatives to spend their money on, and they tried to protect their money from going into the pockets of the German occupier by buying life insurance policies (Van Gerwen 2000).

The occupation by the Germans also had a more structural and far longer lasting effect on the development of the Dutch life insurance market. In 1941, the German occupier introduced new fiscal rules, considerably enlarging the possibilities to deduct life insurance premiums from taxable income (Barendregt and Van Langenhuijzen 1995). Until a few years ago, those and other fiscal facilities for life insurance business were strong incentives to buy policies.

Growing wealth after WWII resulted in a spectacular growth of the total sum assured, from dfl. 8 billion in 1945 (€3.6 billion) to dfl. 120 billion (€55 billion) in 1970, and to nearly dfl. 2,000 billion (nearly €900 billion) in 2002. But in 2002, the “everlasting” prosperity for life insurance business ended abruptly. With the turn of the century, a new era had started for the Dutch life insurance market.

  1. Non-Life Insurance in the Netherlands

In the sixteenth and seventeenth centuries (the “Golden Age”) Holland became the leading trading center in the world. As trade is not possible without insurance—for example, against the perils of the sea—insurance bourses were founded and insurance business flourished. In 1531, skipper Mathias Kuntze insured his ship against the perils of the sea in Antwerpen, a central town in the south of the Netherlands. In the 1560s, during the reign of Charles Quint, insurance broker Juan Henriquez underwrote on average 100 policies a month in Antwerpen.

In the Golden Age from 1580 to 1640, Amsterdam became the most important trading place in the Netherlands, surpassing Antwerpen and Brugge. In 1619, the Amsterdam bourse opened. At this trade bourse, insurance brokers and insurers also met to write marine insurance policies. During the 1700s, Amsterdam became the most important marketplace for transport insurance. Later on, important insurance bourses were also vested in Rotterdam and Middelburg. The occupation of the Netherlands by the French in 1795 and the war between Britain and French in the following years lead to the downturn of the worldwide leading position of the Dutch bourses. The London market especially profited from this downturn, resulting in Lloyd’s of London becoming and still being the most important co-insurance market in the world (Oosenbrug, et al. 1996). For that matter, the first chairman of Lloyd’s, Marten Kuyck van Mierop, was a Dutchman (Pestman 1983).

In the second half of the sixteenth century, the first fire insurance policies were written, based on mutuality between craftsmen in specific kinds of businesses. Only in 1720, the year of the famous South Sea Bubble, the first non-life insurance company was founded, the Maatschappij van Assurantie, Discontering en Beleening der Stad Rotterdam (Van Bameveld 1984). This company survived as an independent company until the beginning of the new millennium, when it was acquired by Fortis.

After 1795, the interest of insurance brokers and insurers shifted more and more from transport insurance to fire insurance. In spite of the relatively recent and strong rise of auto insurance and disability insurance, fire insurance still remains one of the central branches in the general insurance business in the Netherlands (Oosenbrug 2004).

Although accident insurance and automobile insurance were introduced at the end of the nineteenth century, it was not until the second half of the twentieth century that modem disability insurance and automobile insurance became common. For a long time, only sickness funds and then compulsory health insurance funds— originating partly from the sickness funds of the medieval occupational guilds— dominated health insurance in the Netherlands. Private health insurance became common only in the twentieth century. Compulsory health insurance funds are still dominant players in the Dutch market for health insurance.

  1. Traditional Openness of the Dutch Insurance Market

Holland has long been known by foreigners for its merchants and clergymen. As merchants, the Dutch learned early in their history that an open market policy is the best guarantee to stimulate trade and, as a result, wealth. While their famous business sense drove them all over the world to open trade with local populations, at the same time they opened their home markets for foreign merchants. As a consequence, in its Golden Age the Netherlands became the central trading place for the entire “old” world.

The Dutch borders were open not only for trade but also for immigration. In time, many refugees from less liberal and tolerant countries fled to the Netherlands; skilled craftsmen among them strengthened the Dutch labor force and thus the Dutch economy.

So the Dutch were traditionally well acquainted with the blessings (including economic ones) of liberalism and tolerance. In creating the current insurance industry regulatory system, lessons learned were well remembered, and the resultant system was very liberal. Insurance companies were free to make their own rates and policy terms; and supervisory regulation focused only on solvency rules (Vermaat and Oosenbrug 1994). As long as the solvency rules were adhered to, the market participants were free to do business as they liked. New entrants could come into the market with their own (competitive) premium rates, policy terms, and provision rates by simply having the required solvency margin, which was in principle enough to get a license to operate. With a very well diversified distribution structure and independent agents being one of the most important channels for distribution (Van Voorst Vader 1995), entering the Dutch insurance market was relatively easy from an operational standpoint too.

In the last decades of the twentieth century, supervisory regulation within the European Union was harmonized. On the one hand, the Dutch supervisory rules had to be tightened. On the other hand, and more radically, the supervisory rules in other countries such as Germany, Italy, and France had to be changed fundamentally. “Material” supervision on rates and policy terms had to be abolished and the relatively liberal “normative” Dutch (and British) system of solvency-oriented supervision became the standard for the whole European Union (Pearson 1995; Oosenbrug 1995b; Van den Berghe 1995; Verkerk-Kooiman 1994).

  2. Introduction

After nearly two decades of strong growth figures for the Dutch domestic market, the booming market trends seem to have ceased since the turn of the century. In line with global developments, the economy is in general cooling down, competition is becoming stronger, and pressures for more market transparency are increasing. In addition, the generous special tax breaks for life insurance policies were changed drastically, partly to enhance the attractiveness of the Netherlands as a domicile for foreign companies by cutting general tax rates.

  1. Recent Changes in the Tax System

As mentioned, generous tax facilities for life insurance policies were retrenched as a result of the wish to cut general tax rates. Next to those budgetary considerations, the retrenchment of the life insurance facilities also resulted from the long-felt desire to create a more level playing field with straightforward savings and investment products.

In 2001, the maximum for the unconditional tax credit for premiums paid for life annuities was reduced from € 2,804 to not more than € 1,036 per person. As of January 1, 2003, the possibility of an unconditional tax credit for premiums paid for life annuities was totally abolished. Today, only people with deficiencies in their pension rights can deduct premiums paid for life annuities from their taxable income (Oosenbrug loose-leaf).

As of January 1, 2001, the fiscal position of endowment policies also changed. Until 2001, life and death benefits from endowment policies could, up to some limited amount, be received free of income tax, while life insurance policies in general were exempted from personal capital tax. In 2001, the fiscal system for revenues from savings and investments was changed drastically. A general capital gains tax for all kinds of valuable assets was introduced. There is no longer any special exemption for life insurance policies, except one very specific—and limited—exemption for endowment policies related to mortgages.

As a consequence of the changes in the tax system, simple tax-driven production decreased and many life insurers and intermediaries must make a turnaround from a marketing strategy based on “hit-and-run” selling to “advice-based” selling.

  1. Further Recent Developments in the Business Environment

At the same time that many market participants must make a turnaround in their marketing strategy, the regulatory environment for insurers and intermediaries is changing rapidly and accounting rules are being tightened.4 Thanks to the long history of prosperity, insurers were very well capitalized by international standards and generally could stand the effects of the changes in their business environment. On the other hand, many intermediaries already faced serious problems in the new environment. Some of the “hit and run” intermediaries went bankrupt. In addition, due to the sliding and long-lasting crashes on the stock exchanges during recent years, insurance companies were hit directly by the adverse economic developments.

  1. Impact of Recent Developments on the Financial Condition of Dutch Insurers

As Figure 9.1 clearly shows, the formerly generous solvency positions were hit seriously during the first years of the new millennium. For funeral funds, the average solvency ratio tumbled from almost seven at the end of 2000 to less than three at the end of 2002, The average solvency ratio of the Dutch life insurers was nearly halved within three years, and the average solvency ratio of the non-life insurers fell from nearly five to about two-and-one-half.5

When in 2003 at last the world-wide crash on the stock exchanges stopped, the solvency margins of the Dutch insurers recovered, but only a bit. The average solvency ratio of the funeral funds tumbled again after the consolidation that took place in 2002.


♦ Non-Life Insurers Life Insurers - A- ■ Funeral Funds

Source: PVK and Central Bureau of Statistics.

Notes: The solvency ratio is the actual solvency margin of a company divided by the required solvency margin of that company. See Oosenbrug (2003) for detailed information about the way the actual and required solvency margins of the different kinds of insurance companies have to be calculated.


Figure 9.1. Average Solvency Ratio of Non-Life Insurers, Life Insurers, and Funeral Funds, 1991-2003

At the same time, relatively low capital market interest rates put the profitability of the insurance business under serious pressure. In addition, for non-life insurers, the business environment was further adversely affected by the huge premium rate increases for reinsurance coverage and the loss of reinsurance capacity in the market following September 11, 2001. For the first time in decades, in 2002, reported net results of life insurers dropped dramatically, from the average percentage of gross premiums written of roughly 10 percent to a very meager 1 percent. At the same time, reported net results of non-life insurers sank from nearly 4 percent to a comparable 1 percent of gross premiums written. Although reported results recovered in 2003, it seems likely, especially in life business, that future results will no longer be as impressive as they used to be.

  2. The Total Market

From 1985 to 2003, the total life and non-life insurance premiums written grew on average by almost 8 percent a year. This was mainly caused by a nearly double-digit average growth rate for life business, but non-life business also showed a respectable growth rate of more than 6.5 percent a year.

Figure 9.2 shows the development of the total market from 1985 to 2003 in terms of gross premium income written and the division of the market into life and non-life business. In the figures used, some funeral funds are categorized as life insurers because they have a license to operate under the law on the supervision of insurance companies; statistically, those funds are treated and accounted for by the insurance supervisor as insurance companies. The largest funeral funds, in particular, applied for such a license under the stricter supervisory regime for insurance companies.

Total gross premiums written by the funeral funds licensed under the less rigorous special supervisory regime for (specialized) funeral funds amounted only to the relatively marginal sum of €81 million in 2003. Relative to the amounts of premiums written in normal life and non-life business, the premiums written by the specialized funeral funds are so marginal that it is not possible to show the development of that kind of business in Figure 9.2. Total premiums written are not more than approximately one-third of a percent of total premiums written in normal life business. From 1998 until 2003, gross premiums written grew from only €70 million to not more than €81 million, for an average growth rate of approximately 3 percent a year.

In the beginning of the 1980s, non-life business accounted for approximately 60 percent of total insurance business. Although growing at a steady rate most of the


Total Insurance 1 ♦ Non-Life Insurance M Lite Insurance


Source: PVK and Central Bureau of Statistics.

Source: PVK and Central Bureau of Statistics.

Figure 9.2. Gross Premiums Written by Non-Life Insurers and Life Insurers, 19852003 (€ Billions) time, life business was growing still faster. Since 1990 the total life insurance premiums written exceed the total non-life insurance premiums written. In 2001 the situation of the 1980s was reversed, with life business accounting for approximately 60 percent of total business.

As Figure 9.2 clearly shows, life business growth collapsed abruptly in 2002. In one year the relative share of life business shrank from almost 60 percent to less than 55 percent. With a growth history of 5 percent to 12 percent for years, in 2002 the growth rate for total business marginalized to a “pitiful” 0.6 percent.

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