German non-life insurers are likely to continue increasing their premium income in 2020 to offset growing catastrophe losses and dwindling investment returns, according to analysts at Fitch Ratings.
The rating agency’s outlook for the sector remains stable, on the basis that the market is expected to achieve sufficient premium growth to maintain good profitability.
Natural catastrophe losses are normally considered to result in claims of up to €2.5 billion each year for the German non-life sector.
However, with average claims increasing in recent years, Fitch will now regard claims of up to €3 billion to be within the range of normal catastrophe activity.
Motor new business rates are also forecast to decrease at end-2019 and throughout 2020 due to growing competition.
In 2018, the motor line reported an underwriting profit with net combined ratio of 96.7% for 2018 and we expect the net combined ratio to be about 96% for 2019.
Analysts at Fitch predict that the German non-life market will report premium growth of 2% in 2020, driven by the hardening market in commercial insurance and helped by the strong economic environment.
Overall underwriting performance is also expected to remain strong, with strong profitability from individual liability, accident and contents insurance making up for weaker profitability in the commercial lines.
The overall 2020 combined ratio is forecast 94%, assuming average claims from natural catastrophe activity.
Fitch also highlighted buildings insurance as a particularly unprofitable segment in recent years, but analysts believe the segment will have turned profitable in 2019 and will continue to be in 2020 as insurers push through further rate increases.
