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A.M. Best Special Report: German Non-Life Insurers’ Focus on Rates Improves Profitability


LONDON--(BUSINESS WIRE)-- The German non-life insurance market has proved to be resilient, as it continued to enjoy growth in 2011 and is expected to remain robust in 2012, according to a new report by A.M. Best Co.

In 2011, the non-life insurance sector recorded its strongest annual percentage increase in premiums since 2003, expanding by 2.5% to reach EUR 56.6 billion of premium income. The primary contributor to such growth was motor business, as rates were lifted after years of inadequate pricing. Insurers have also been able to increase rates for liability insurance. After the global financial crisis, it appears that insurers are evaluating risks more closely before underwriting. Pricing for most other property/casualty risks has been stable.

The special report, “German Non-Life Insurers’ Focus on Rates Improves Profitability,” states non-life insurers are increasingly focusing on underwriting profitability as the low interest rate environment in Germany continues to suppress investment income.

Sam Dobbyn, associate director, analytics, said, “The German non-life insurance market posted an improved total combined ratio of 97.9% in 2011. In comparison, 2010’s combined ratio was 98.2%, although this was a particularly poor year for losses, with the impact of windstorm Xynthia and freezing weather conditions at both the beginning and end of the year.”

Grace Panti-Amoa, financial analyst, said, “A.M. Best believes the non-life insurance sector is conservatively invested, with the current weak investment environment forcing insurers to focus on profitable underwriting as the yields on German government bonds remain at historic lows.”

The report adds that as the low interest rate environment is likely to persist, some of the larger insurers are investing more actively in corporate bonds and commercial real estate financing projects as they seek better yields. German non-life insurers are anticipating a modest increase in premium in 2012. Provided there are no major catastrophes for the remainder of the year, A.M. Best expects the sector should be well positioned to post a further improvement in its combined ratio.

However, Yvette Essen, report author and director of industry research, Europe and emerging markets, added there are offsetting factors for premium growth. “These include the cautious income expectations of private households. The growing use of comparison portals over the past few years has increased competition and places further downward pressure on prices. Insurers additionally faced a number of major loss events in 2012, including a long period of freezing weather at the beginning of the year that caused burst water pipes.”

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Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best Co.
Sam Dobbyn, +(44) 20-7397-0264
Associate Director, Analytics
Grace Panti-Amoa, +(44) 20-7397-0331
Financial Analyst
Yvette Essen, +(44) 20-7397-0322
Director, Industry Research
Europe & Emerging Markets
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
Senior Manager, Public Relations

Source: A.M. Best Co.