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Nominal GDP USD bn 1850.74Population mil 60.7GDP Per Capita USD 30,507Real GDP Growth % 0.9Inflation Rate % -0.1

Literacy Rate % 99.9Urbanization % 69.0Dependency Ratio % 56.5Life Expectancy Years 83.3Median Age Years 45.9

Insurance Regulator

Premiums Written (Life) USD mil 122,438Premiums Written (Non-Life) USD mil 39,945Premiums Growth (2015 - 2016) % -2.8

ItalyFranceGermanySpainSwitzerlandUnited Kingdom

CRT-1CRT-1

Country Risk TierCRT-2CRT-1CRT-1CRT-2

Vital Statistics 2016

Insurance Statistics

Regional Comparison

The Institute for the Supervision of Insurance Companies (IVASS)

United Nations Estimates

Source: IMF, UN (2015 figures), Swiss Re, Axco and A.M. Best

Regional Summary: Western Europe• Western Europe is a highly developed and affluent region.

The 28 countries of the EU accounted for approximately 21.7% of the world’s gross domestic product in 2016, down from 22.0% in 2015 and 24% in 2014.

• The U.K. voted to leave the European Union last year, although France voted against the nationalist candidate who vowed to leave the EU. Other important upcoming elections in Western Europe are in Germany (legislative elections in September 2017) and Italy (legislative elections in February 2018).

• The European Central Bank (ECB) is likely to maintain its The European Central Bank (ECB) is likely to maintain its asset buying program through the end of 2017. The EU’s GDP is likely to increase marginally at a rate of 1.98% in 2017, and inflation is likely to increase to 1.8% in 2017, which is more in line with the ECB’s target range of 2%. Inflation in 2016 was 0.2%.

Economic Risk Political Risk Financial System Risk

Country Risk Tier 1 (CRT-1) Very Low Level of Country Risk

Country Risk Tier 2 (CRT-2) Low Level of Country Risk

Country Risk Tier 3 (CRT-3) Moderate Level of Country Risk

Country Risk Tier 4 (CRT-4) High Level of Country Risk

Country Risk Tier 5 (CRT-5) Very High Level of Country Risk

ItalyCRT-2August 22, 2017Region: EuropeCountry Risk Criteria ProceduresGuide to Best’s Country Risk Tiers• The Country Risk Tier (CRT) reflects A.M. best’s

assessment of three categories of risk: Economic, Political and Financial System Risk.

• Italy, a CRT-2 country, is a founding member of the EU and eurozone. It has low levels of economic and political risk and moderate levels of financial system risks.

• After three years of economic contraction (2012-2014), Italy’s economy returned to growth in 2015. GDP growth in 2016 was 0.9%.

• Economic conditions are improving, but concerns remain over geopolitical uncertainty, Brexit and its potential negative implications, and a weak banking sector -- a few headwinds that could derail a fragile recovery and be a drag on growth.

• The majority of countries are categorized as CRT-1 and CRT-2. The notable exceptions are the Eastern European countries of Bosnia and Herzegovina, Belarus, and Ukraine.

BEST’S COUNTRY RISK REPORT

UnitedKingdom

Ukraine

Turkey

Tunisia

Syria

Switzerland

Sweden

Spain

Slovenia

Slovakia

SerbiaSan Marino

Russia

Romania

Portugal

Poland

Norway

Netherlands

Morocco

Republic ofMoldova

Malta

Macedonia

Luxembourg

Lithuania

Liechtenstein

Lebanon

Latvia

Italy

Israel

Ireland

Hungary

Greece

Germany

Georgia

France

Finland

Estonia

Denmark

CzechRepublic

Cyprus

Croatia

Bulgaria

Bosnia &Herzegovina

Belgium

Belarus

Austria

Armenia

Andorra

Albania

Montenegro

Isle of Man

Jersey

Guernsey

Monaco

Gibraltar

UnitedKingdom

Switzerland

Sweden

Spain

Slovenia

Slovakia

SerbiaSan Marino

Romania

Portugal

Poland

Norway

Netherlands

Macedonia

Luxembourg

Lithuania

Liechtenstein

Latvia

Italy

Ireland

Iceland

Hungary

Greece

Germany

France

Finland

Azores

Estonia

Denmark

CzechRepublic

Croatia

Bulgaria

Bosnia &Herzegovina

Belgium

Belarus

Austria

Andorra

Albania

Montenegro

Isle of Man

Jersey

Guernsey

Monaco

Gibraltar

Economic Risk: Low• Italy’s economy is the third-largest in the eurozone and

has recovered modestly. Growth has been tepid and is expected to reach only 1.0% in 2017.

• Italy’s debt levels are high (albeit stable), which makes the country vulnerable to external shocks; appropriate fiscal buffers should be pursued to mitigate such risks. Government debt was estimated at 133% of GDP in 2016.

• Sluggish productivity remains an obstacle to the economy’s growth prospects. The IMF has recommended implementation of structural reforms in the labor market to correct this issue.

• Historically, Italy’s northern region has been industrial and highly developed, while the southern region has been primarily agricultural and less developed. In the hopes of diminishing the difference between the two, Italy will be investing heavily into its southern infrastructure.

Political Risk: Low• Former Prime Minister Matteo Renzi resigned at the end

of 2016 after his constitutional reform was defeated in a December referendum. His replacement, Paolo Gentiloni, has stabilized the political waters and is focusing on electoral reform. Earlier-than-planned elections are possible in the event of political instability.

• In contrast with its European neighbors, Italy has slow and inefficient bureaucratic, judicial, and tax systems. Some reforms in these sectors have been implemented, but additional reforms will be needed.

• Given the high levels of public debt, fiscal consolidation is necessary but any efforts to cut public spending will be met with public backlash.

• Corruption is a prevailing problem in both business and the government. According to Transparency International’s 2016 Corruption Perceptions Index, Italy placed 60 out of 176 countries.

Financial System Risk: Moderate• The Institute for Insurance Supervision (IVASS) regulates

the insurance industry.

• Non-performing loans (NPLs) continue to burden the banking industry, inhibit lending ability, and weaken bank balance sheets. Although initiatives to address NPLs have been launched, acceleration of NPL resolutions should remain a priority.

• The banking industry also lacks efficiency. The IMF has recommended the industry consolidate some banks to improve efficiency.

• In June 2017, the EU agreed to let Italy begin recapitalizing its riskiest bank, Monte dei Paschi di Siena, provided private investors purchase its bad loans and restructuring occurs. The agreement will raise the government’s already high level of debt.

Economic Growth (%)

-6

-5

-4

-3

-2

-1

0

1

2

3

4

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Real GDP CPI Inflation

Source: IMF World Economic Outlook and A.M. Best

Political Risk SummaryScore 1 (best) to 5 (worst)

0

1

2

3

4

5International Transactions

Policy

Monetary Policy

Fiscal Policy

Business Environment

Labor FlexibilityGovernment Stability

Social Stability

Regional Stability

Legal System

ItalyWorld Average

Source: A.M. Best

Italy

GDP Per Capita and Population

0

10

20

30

40

50

60

70

80

90

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Italy France Germany Spain Switzerland United Kingdom

USD

Millions

GDP Per Capita Population

Source: IMF and A.M. Best

BEST’S COUNTRY RISK REPORT

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