In its latest sector outlook report, Fitch Ratings anticipates a stable trajectory for German non-life insurance in 2024.
The analysis highlights key factors contributing to this outlook, including expectations of reduced inflationary pressure on motor and property claims, improved investment income due to higher fixed-income yields, and the maintenance of underwriting profitability.
The report forecasts a stable net combined ratio of 99%, reflecting Fitch’s confidence in insurers’ ability to navigate challenges.
Despite a weakened net underwriting result in 2023, stabilising at EUR 0.5 billion, Fitch anticipates a recovery from the estimated EUR 2.7 billion in 2022.
Premium adjustments in motor and property lines are expected to cover rising costs driven by claims inflation and higher reinsurance expenses.
The sector’s historical resilience in maintaining high reserve adequacy levels is also emphasised, contributing to stable Rating Outlooks.
Dr. Christoph Schmitt, Director at Fitch Ratings, emphasised the expectation that rate increases will align with claims inflation in 2024. He anticipates a significant improvement in investment income once low-yielding fixed-income bonds mature out of insurers’ portfolios.
Fitch projects a 6% stable premium growth in 2024, primarily fueled by rate increases in buildings and motor insurance. Despite challenges posed by claims inflation, the sector’s strong reserve adequacy is expected to persist.
The report acknowledges challenges faced by the buildings and property lines, citing the impact of higher net retentions and reinsurance costs, particularly following the 2021 Ahrtal floods.
In terms of investment income, Fitch forecasts a slight increase in 2024 and 2025, contributing to the mitigation of the negative impact from lower underwriting profitability.
Overall, Fitch expects the German non-life insurance sector to maintain strong profitability, capitalization, and underwriting discipline through 2025.
The report concludes that the stable outlook is underpinned by very strong capital positions, resilient earnings, and robust business profiles within the sector.
