Improved conditions in Germany’s primary insurance sector, coupled with increased demand for reinsurance protection in certain lines of business is expected to drive positive premium development across the German market in 2020, according to E+S Rückversicherung AG, Hannover Re’s German business subsidiary.
At the reinsurance industry meets in Baden-Baden this week, E+S Rück has announced its pricing outlook for the German market in the year ahead.
Positive premium development is expected over the next year, and the reinsurer states that this is supported by business opportunities in telematics and legal protection, but above all, improvements in the primary insurance sector, which are especially beneficial for proportional reinsurance business.
Dr. Michael Pickel, Chief Executive Officer (CEO) of E+S Rück, underlined the importance of reinsurance rate rises.
“Bearing in mind the already strained state of technical profitability and the further decline in interest rates, higher reinsurance prices are essential in many segments. Along with loss-impacted natural catastrophe covers, we see a particularly pressing need for further adjustments in the motor and industrial fire insurance lines.”
In the nat cat space, the firm expects a slight increase in rates as a result of heightened risk awareness among reinsurers, driven in part by the impacts of windstorm Dragi-Eberhard in March and Jorn in June. As a result, E+S Rück is expecting to see growing demand and price adjustments under loss-affected programmes.
A continuation of increased demand for reinsurance in the German market is also anticipated in the area of legal protection insurance, which the reinsurer says is partly a result of accumulation losses.
There’s also growing demand in the German marketplace for telematics tariffs, and, in response to this, the reinsurer is offering customers a telematics solution with a proprietary pricing basis with a pilot project being launched this month that includes a corresponding telematics app.
As noted by Pickel, E+S Rück sees an urgent need for adjustments in both the motor and industrial fire insurance business segments. Starting with the former, and E+S Rück expects stable average premiums and conditions for the most part under proportional treaties. However, this is in contrasts with higher costs for spare parts and repairs, which will ultimately have an impact on the sector’s profitability. Despite this, the reinsurer is confident that the low interest environment will drive the required rate adjustments in non-proportional lines, especially in motor third party liability insurance.
In the past, industrial fire insurance has been mostly a loss-making line of business, although efforts by the primary market to improve this segment of the market are starting to take hold, says E+S Rück. As a result, the reinsurer is expecting to see improved conditions in the reinsurance market, although pressure is likely to persist on the claims side.
“All in all, E+S Rück anticipates further attractive business opportunities in Germany for 2020 and considers itself well on track to maintain its market share on a high level and selectively expand the portfolio in certain lines,” says the firm.