According to analysts at Fitch Ratings, German public-sector insurers’ non-life underwriting profitability is likely to weaken in 2023, which will be driven by higher reinsurance prices and claims inflation.
Fitch noted that it forecasts a net combined ratio of 98% for 2022 and 99% for 2023, compared with a five-year average of 93% between 2017 – 2021.
Analysts also stated that they expect consolidation of public-sector insurers to continue as many of them are of a small operating scale.
Moreover, public-sector insurers represents a third type of insurer in Germany alongside stock companies and mutual insurers. Public-sector insurers are part of the German public-sector financial group Sparkassen-Finanzgruppe (Sparkassen) (A+/Stable).
Fitch highlights that public-sector insurers’ strong market position is reflected in an aggregated market share of 10% within the German primary insurance market. Viewed together this group would rank second in Germany’s primary insurance market.
Additionally, Fitch noted that it expects premium growth in the buildings and property lines to be insufficient to compensate for the increase in reinsurance costs and claims inflation, until at least 2024.
As a result, Fitch warns that the sector’s combined ratio could potentially weaken to 99% in 2023 from 97% from 2022.