German insurers resilient in face of catastrophic losses: Fitch

The German non-life insurance sector is showing resilience in the face of costly natural catastrophe events, such as storm Bernd last summer, according to Fitch Ratings.

Fitch has published analysis of the ten largest German insurers’ 2021 accounting data. The ratings agency finds that the companies’ net combined ratios were in line with its expectations, which factored in estimates for losses from the severe flooding following Bernd.

Fitch estimates that last year’s net combined ratio for the German insurance sector will be about 96%. “This would continue the sector’s record of combined ratios consistently below 100%… even in years with high natural catastrophe losses,” said the ratings agency.

Its forecast for the sector’s net combined ratio in 2022 is 93%, unchanged from the start of the year despite storms hitting Germany in February.

Fitch expects the associated net claims for this event to be no more than €750m, which would only add about one percentage point to the German insurance industry’s combined ratio. This is “not enough for us to change our forecast”, it said.

Last year’s July floods were one of Germany’s largest natural catastrophe events ever. “At the time, we estimated that insured losses from the floods could add up to the sector’s net combined ratio for 2021, but we still expected the ratio to be below 100% given below-average claims from non-catastrophe insurance in H1 2021,” said Fitch.

“Our expectations have been borne out. The ten companies’ weighted-average net combined ratio for 2021 was 97.4%, with only Provinzial, which was hit hardest by the floods, reporting a ratio significantly over 100%. Reinsurance proved important for most of the companies, as evident in net combined ratios that were significantly below gross combined ratios. The pattern was different for companies focused on industrial insurance cover in global markets. These reported very strong gross combined ratios, indicating low claims, but weaker net combined ratios as most of the premiums for industrial cover are ceded to reinsurers,” it continued.

The German insurance association, the GDV, does not publish a net combined ratio for the market, but it estimates that the gross combined ratio for 2021 will be 102%. This would indicate a substantial underwriting loss of about €1.5bn before reinsurance recoveries, said Fitch.

Its sector outlook for the German insurance market for 2022 is neutral.

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