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AMSTERDAM - APRIL 04, 2019 08:21 AM (EDT)
AM Best has maintained a stable market segment outlook on Germany’s non-life insurance market, supported by key factors that include solid rate adjustments in core business classes that are keeping pace with claims inflation, thereby supporting robust technical profitability, and strong balance sheets among market participants, which are positioning them well to withstand potentially challenging market dynamics. Despite the stable outlook, AM Best notes a slowdown in the economy and persistently low interest rates remain challenges to non-life insurers.
A new Best’s Market Segment Report, titled “Market Segment Outlook: Germany Non-Life”, states that economic expansion in Germany is anticipated to weaken in 2019, which likely would temper growth in the non-life insurance market. Still, AM Best expects profit margins of Germany’s non-life insurers to remain robust, supported by sound rate adjustments. Motor and property insurance, Germany’s two largest insurance lines of business, accounting for approximately 70% of total non-life premiums, saw rate increases in 2018 of approximately 3% and 4.5%, respectively.
The impact of adverse weather events will continue to contribute to market performance volatility over the long term, as natural catastrophe risk in Germany is considerable, and insurers tend to retain a high proportion of retail risks. In 2018, natural catastrophes, mainly windstorm and hail events, resulted in insured losses of approximately EUR 2.7 billion for property risks, which was the highest annual amount since 2013. Germany’s non-life market maintains a robust level of capital adequacy, helped by good retention of earnings. In AM Best’s opinion, the market continues to be well-positioned to withstand challenges that may arise from increasing competition and natural catastrophe losses. Surplus capital provides a buffer to adverse performance, and a continuous focus on enterprise risk management, due in part to the implementation of Solvency II, has led to an improvement in the control and oversight of key risks.
AM Best expects insurers to continue to focus on underwriting operations in their quest to strengthen profitability. Nevertheless, a shift from the current muted investment environment that positively impacts earnings could lead to a corresponding decline in underwriting discipline over the longer term. Additionally, capital market volatility could also influence overall performance.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=284326 .
AM Best is a global rating agency and information provider with a unique focus on the insurance industry.