Markets, business climate and legal environment

German insurance industry

Development of premium income in the individual insurance lines in Germany

2010 1)


in % compared to previous year


Property/casualty insurance



Life insurance/occupational retirement provision



Private health insurance






1) Provisional figures

With growth of a good 4% in 2010 – another slight increase on the previous year – the German insurance industry impressively maintained its positive premium trend of recent years. It should, however, be borne in mind that a not inconsiderable part of this growth derives from so-called single-premium business in life insurance. This is a product group that consists, firstly, of annuity insurance products and, secondly, of so-called capitalization products under which investors are able to park capital at attractive interest rates. Although there was no mistaking an appreciable caution among broad groups of buyers – especially with respect o a long-term commitment such as for retirement provision –, the German insurance industry presented an exceptionally stable picture – even without the growth effect stemming from single-premium business. Despite the limited growth potential due to the high level of market saturation in Germany, the capital and reserves of the German insurance industry make it – now more than ever – a reliable guarantor for protection against the diverse risks faced in both private and business life.

In German property and casualty insurance the upturn in business was further consolidated – insofar as this was possible given the degree of market saturation reached in most lines – and led to premium growth of just under 1%. Motor insurance, the largest single line, continues to be of crucial importance to the business development in property and casualty insurance as a whole. Massive price competition had raged in this key line for numerous years; with the premium level no longer adequate, however, most providers have now begun to rethink their approach with an eye to greater commercial sense, and this has been reflected in corresponding tariff increases for new business. This marks a first step towards bringing about the urgently needed turnaround in average premiums – which are currently still falling – in motor business in the foreseeable future. The growth recorded in motor insurance in 2010 was generated above all by own damage insurance, while premiums for liability coverage continued to decline slightly. In the other property and casualty insurance lines, too, premium increases are to be expected for 2010 – with the exception of marine and general liability insurance. The picture on the claims side shows – compared with the burden of losses incurred in previous years and also with an eye to the premium growth – a disproportionately marked increase, which can be attributed not least to the major loss events recorded in the year under review (including winter storm “Xynthia”). The underwriting results are therefore likely to reflect a rise of 1–2 percentage points in the combined ratio, which could not be offset by investment income on account of the low interest rate environment.

For the second consecutive year the German life insurance industry generated significant premium growth in 2010. With an increase of 7% German life insurers (excluding providers of occupational retirement provision in the form of Pensionskassen and Pensionsfonds) boosted their gross written premium to around EUR 87 billion. As in the previous year, a significant portion of this gratifying growth derived from single-premium business, which recorded a gain of some 30% to reach a volume of EUR 26 billion. Single-premium business was assisted by the prevailing climate and capital market conditions. The funds available for investment were only able to attract very low interest rates in bank deposits, as a consequence of which considerable amounts were invested in products offered by insurers ranging from immediate and deferred private annuities through so-called “Riester” and “basic” pensions to capitalization products. Capitalization products – normally short-term financial investments similar to savings accounts – at times enjoyed very brisk demand, at least as long as an appealing above-average return was offered. Since the fourth quarter of 2010, however, the growth momentum of this form of single-premium business has slowed appreciably – a reflection of interest rate reductions and the wide-ranging restriction of such product offerings to the maturity benefits of providers’ own existing customers. In contrast to single-premium business, new business with regular premium payments fell away sharply owing to the fact that the willingness to enter into longer-term contracts evidently has still to re-establish itself across a broad front in the wake of the shock inflicted by the financial crisis. Nevertheless, customers remain keenly interested in security. This need dovetails with the core competence of German life insurers, who are able to satisfy the diverse spectrum of return and security expectations with their extensive product range.

Despite the protracted low interest rate environment, which continues to put German life insurers to an endurance test that must be taken seriously, and despite policyholder bonuses that are sinking market-wide, maturity benefits in profit-sharing new endowment and annuity business declined only very moderately, if at all. In this respect, policyholders benefited from the fact that the fixing of the interest rate for the interest paid on credit balances constitutes only one of several factors that determine the total amount of surplus participation.