German hard market is over: WTW

The hard market is over in Germany, price increases have stopped and it will become easier again for companies to cost-effectively insure their risks, according to broker WTW.

The Frankfurt-based arm of the global broker says in a semi-annual report on the German industrial insurance market that while pressure remains high in some areas such as property and motor, the positive market trend for buyers should continue in coming renewals.

“Much of the industrial insurance lines have had a challenging time, characterised by the Covid-19 pandemic, the war in Ukraine and the effects of inflation. However, current developments show that the situation is easing again in many sectors,” said Lukas Nazaruk, head of corporate risk and broking for Germany and Austria at WTW.

But WTW reports that premium trends still vary depending on the line of business and sector. Cyber has perhaps seen the biggest shift from hard to soft.

“An unexpected trend reversal occurred in cyber insurance. Last year, providers here were under massive pressure, triggered by large-scale attacks on digital supply chains, especially cloud infrastructures. The loss ratio is now adequate and capacities have increased. In addition to consistent premium adjustments, the reason for this is also the insurers’ high security requirements,” said the broker.

The M&A insurance market is now stable, reports WTW Germany. Insurers have expanded coverage and new global providers have brought additional capacities onto the market, it said.

“However, the number of M&A transactions is increasing again, which will have an impact on the insurance market. This can also be reflected in increasing premiums, although the advantageous cover conditions are expected to remain intact,” said Safak Okur, head of broking Germany and Austria at WTW.

The trend in motor and property insurance is, however, not so positive, said the broker.

“The motor vehicle sector in particular is placing a heavy burden on many insurance companies. It is already becoming apparent that many insurers are increasing their premiums significantly in order to be able to at least partially compensate for losses,” commented Okur.

The German property insurance market has suffered from recent severe weather events. “Since it is expected that such events will increase in the future, the situation for companies, and therefore also for policyholders, will continue to worsen. Natural hazards will be even more restrictive in the future,” said Okur.

Investment in risk minimisation is the best way to protect against future volatility, says WTW.

“The requirement for policyholders to reduce their risk exposure cuts across all areas. The cyber and property divisions are the best examples of the tough action taken by insurers. Companies that have invested heavily in risk prevention in the past now benefit from easier access to capacity,” said Nazaruk.

The rise of new technologies and improved data will hopefully enable insurers to widen their offerings and help avoid future capacity crunches, adds WTW.