“When combined with less-than-stellar equity market returns, it suggests that the market could become more volatile and unpredictable. In the short-term, the expectation for upcoming renewals is a consolidation of the current premium levels, with moderate reductions still possible for risks with an excellent loss history as well as risk quality. Beyond that however, some form of market hardening is looking increasingly likely,” added the German arm of the global property insurance mutual.

Allianz Global Corporate & Specialty recently reported a combined ratio greater than 100% for the German market and said there will be a heightened focus on property renewals as ‘nine out of ten’ large losses occurred in this line as a result.

Dr. Joachim ten Eicken, Member of the Board of HDI-Gerling Industrie Versicherung AG, said he believes markets in Germany have reached ‘the bottom line’ so expects no further reductions. But he added that, depending on size of business, some lines are still very competitive. HDI’s German combined ratio is expected to be in the late 90s.

Dr Dankwart von Schultzendorff, Regional Country Manager for Germany, Switzerland and Austria at ACE, said that despite decreased ceded premiums in recent years, losses had been relatively low, thus providing profits in industrial lines business in general. But he added that losses are catching up and the rate environment remains quite competitive for the sixth year in a row. “However, in certain lines like Marine, profitability has been at best marginal,” he added.

“Depending on the level of losses the market will incur for the remainder of the year, we expect rates to remain flat with rate increases in some natural hazard and cat exposed lines of business,” said Dr von Schultzendorff.

Dr Jürgen Kurth, CEO of AXA Corporate Solutions Germany said that many German corporations and their insurers have been affected again this year by a series of extraordinary catastrophic events worldwide and losses in Germany have also increased—with the 2nd largest property loss within the last 20 years.

“Overall combined ratios seem to reflect still good technical results of some players. However, on an underwriting year basis results in some lines of business are rather not profitable, and it could be dangerous—as a recent study on US P&C insurers has demonstrated—to further take reserves from previous years to smooth the impact of actual losses,” said Dr Kurth.

He said that since 2004, property premium rates have fallen by an average of 50% throughout Europe, but added that this has now slowed down, as has already been seen in major markets such as the UK and France. “In the light of Solvency II, and the necessary remuneration of equity, the German market has to react similarly where adjustment is required,” said Dr Kurth.

One obvious cause of the sustained soft market in the Germany industrial insurance market in particular has been high capacity and the arrival of plenty of fresh faces in recent times.

FM Global noted that no ‘meaningful’ capacity has entered the market during the last 12 months but added no capacity was withdrawn from the German market either. “All in all, capacity is still abundant maintaining a competitive environment across most risks. Higher hazard risks that have experienced some loss traffic are currently the only category seeing carriers attempt in some cases to impose a more technical approach to rates—albeit so far with limited success,” it stated.

HDI-Gerling said that, depending on the segment and line of business, the market remains very competitive and ‘volume driven’ underwriting is being carried out by the same competitors as last year. Capacity has only withdrawn if it has suffered major catastrophe losses, said the company.

XL Germany has stated that it has seen new carriers enter the market, particularly in professional lines (D&O).

“In the global programmes area, Germany is an extremely competitive marketplace with new entrants facing challenging times. This is because of the many global and international companies based here,” it added.

In terms of growth opportunities that remain in this hardening and competitive market, ACE’s Dr von Schultzendorff said that it sees segments or individual clients rather than whole lines that offer opportunities.

“After the financial crisis, the market for D&O and E&O coverages for financial institutions firmed significantly. However, although capacity for FI risks is still limited, when pricing came down at the last renewal, ACE shifted some capacity from the primaries to better priced higher layers,” he said.

XL said that it has identified the middle market segment, environmental and P&C as key areas. “We are also currently enhancing our D&O offering through the recruitment of professional lines underwriters in our German offices. In addition, we have restructured the IPC Property division establishing a strong regional unit which amalgamates Germany, Switzerland, Austria, Italy Central and Eastern European countries to ensure our clients get a strengthened local service,” it explained.

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