German insurance market growing again but brokers still feel the pinch

In total the German property and casualty market is expected to record €55.1bn in premiums this year, a rise of 0.7%. The motor insurance market, which declined for years, is likely to see a rise of 0.4% to €20.1bn. Industrial lines show a mixed picture–industrial, commercial and agricultural fire (German industry no longer shows industrial figures separately) has risen by 0.5% to €5.7bn. Marine has fallen this year by 2%, but is still profitable, the insurance federation GDV said. Results vary, too. Motor is likely to see a combined ratio of 105%, as price rises will only filter through in two to three years. But while insurers hope that the cycle has turned, and industrial customers feel the warm air of recovery following the crisis, German brokers are not feeling as upbeat.hide“With very few exemptions, the recovery of our earnings is not keeping pace with the recovery of our clients,” said Leberecht Funk, head of Hamburg-based broker Funk-Gruppe and chairman of German broker association VDVM. The main problem is that prices for industrial insurance are still at a very low level, even if they have bottomed out. This affects commissions. “The insurance industry has not found any means to stop premium decline,” said Mr Funk. Ralph Liebke, German head of broker Aon, confirmed this trend. “We feel positive developments later than the rest of the economy,” he said. Mr Liebke expects that brokers will feel a recovery only from 2011 onwards. “In addition, the valuation basis for a lot of policies is smaller,” he said. Marine and liability premiums are calculated as a percentage of turnover. As sales were still declining in a lot of companies in 2009, the insurance premiums show a decrease in 2010 when 2009 is taken as the reference year. Meanwhile, the fees paid by larger companies are also not rising. The large global brokers, Aon, Marsh and Willis, are being increasingly challenged by local brokers. Take Ecclesia, one of the fastest growing companies. The firm is owned by the Catholic and Protestant churches and has grown out of arranging cover for hospitals and welfare institutions. It is now trying to become a full-blown industrial broker by means of a partnership with UK-based JLT International Network. Ecclesia records commission income of €140m, and is likely to be one of the market leaders, with Aon not far ahead. Funk-Gruppe, Südvers, Leue & Nill, Schunck and BDJ are also among the bigger local brokers, which make life for the global players more difficult. “You do not find local brokers at the level of the companies listed in the DAX 30, because they do not have a global network,” said Aon's Mr Liebke confidently. “But below the level of the DAX all the other brokers are represented and all of them are trying to win new business with small and medium-sized enterprises at the same time,” he said. “The air is getting thinner in the business with big industry clients. This business is also not growing in the medium term,” said Mr Liebke. This is one of the reasons why brokers are so keen on smaller companies. Mr Liebke said that no decision has been taken on contingent commissions and their use in Germany. “It is important for us to be able to operate under the same conditions as other brokers,” he said, when commenting on the lifting of the ban on contingent commissions. “We want to have the option to position ourselves differently in this field, but we will not do anything that is contrary to our clients' interests,” said Mr Liebke. Aon will decide on a regional basis whether to seek contingency commissions or not. German brokers are also trying to improve their income via pooling concepts. Marsh hit the headlines in the summer with a new pool contract for D&O with Allianz Global Corporate & Specialty. Many industry clients fear that brokers engaged in these pools will not search for the best offer, but for the insurer which pays the highest commission. “I am not violating my duty as a broker if I put out tenders for several contracts in a combined manner as long as I inform the client about this,” said Aon’s Chief Broking Officer, Sven Erichsen. Georg Bräuchle, one of the managing directors of Marsh Germany, also does not see a problem with pooling concepts. “We achieve wholesale terms for small and medium sized clients,” he said.

German insurance market growing again but brokers still feel the pinch

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