AM Best has revised its outlook for the German non-life insurance segment to stable from negative, driven by expectations that premium rate increases will continue to keep pace with claims inflation, leading to a stabilisation in profitability.
In its recent report, AM Best said the stable outlook reflects expectations that the segment will achieve top-line growth, supported by rate increases.
“Economic recovery for the country is likely to be slow, leading to modest, but positive, underlying economic support for growth in the segment. In addition, rate increases should continue across the next year leading to higher revenue growth than would be suggested by the underlying growth of the economy,” said AM Best.
AM Best expects positive rate adjustments to continue in 2026 across most non-life segments, although at a more moderate pace than in preceding years.
The ratings agency also noted that competitive pressure is increasing in the motor line of business; nonetheless, the market is expected to remain rational in 2026.
AM Best added that volatility from extreme weather events and reinsurance pricing remains at manageable levels.
The agency highlighted that Germany’s property insurance market remains subject to volatility in results due to exposure to extreme weather losses. While 2025 was a benign year in this respect, the potential for severe natural catastrophe losses remains, as the product risk in the property segment is dominated by exposure to such events.
AM Best continued, “In 2026, insurers will benefit from the softer reinsurance conditions evident at the 1.1. 2026 reinsurance renewal. The softer reinsurance market conditions have led to significant price reductions, particularly on loss-free property accounts, which will benefit insurers’ technical results.
“In addition, beneficial changes have also been observed in terms and conditions, with less restrictions on coverage. Finally, aggregate protection is slowly making its way back into the segment, although the terms are less favourable than the aggregate protections that insurers benefited from pre-2021.”
