Healthy growth forecast for German non-life sector despite Ukraine war

The German non-life insurance industry is expected to grow at a compound annual growth rate (CAGR) of 6.8%, from $165.4bn in 2021 up to $229.6bn by 2026 in terms of direct written premium (DWP), according to data and analytics firm GlobalData. The firm still expects the German non-life market to grow by 4.7% in 2022 despite the negative impact of the war in the Ukraine, which the German Insurance Association (GDV) believes is likely to hit the life sector growth rate harder. Ashish Raj, insurance analyst at GlobalData, commented: “After contracting by 2.1% in 2020 due to the pandemic, the German economy is expected to grow by 2.8% in 2022. The economic recovery is driven by strong government fiscal measures that include increased healthcare spending, short-term subsidies to preserve jobs, grants for small businesses and self-employed persons, and a temporary VAT reduction.” GlobalData said the economic recovery is expected to support non-life insurance industry growth, which is expected to expand by 4.7% in 2022. Following the GDV’s latest assessment, its general manager Jörg Asmussen said: “For the entire sector, we now expect a premium increase of almost 2.5% [life and non-life] for 2022.” But if the war escalates further, growth is likely to be weaker especially in the life sector. “Here we expect a small increase of less than 1%,” said Asmussen. Before the start of the war at the end of February, the association had expected an even stronger recovery for 2022, with premium growth of up to 3% for the entire sector and up to 2% for life insurance. Last year, German insurers posted a premium increase of 1.4% to reach €225bn across all lines, said the GDV. “Precautionary decisions tend to be postponed in times of crisis,” said Asmussen. GlobalData’s Raj said the increased health awareness sparked by the pandemic is driving demand in personal accident and health (PA&H) lines. “PA&H insurance is the largest general insurance line in Germany, having accounted for 38.8% share of the DWP in 2020. The segment grew by 3.6% in 2020, driven by increased health awareness during the pandemic and rising healthcare costs. The pandemic led to increased health claims, thereby increasing incurred loss for insurers by 4% from $36.8bn in 2019 to $38.3bn in 2020. This led to an increase in premium prices. The segment is forecast to grow at a compound annual growth rate of 7% during 2021-2026.” The motor insurance market will benefit from the German government’s push for increased use of electronic vehicles, predicted Raj. “Motor insurance is the second-largest line, having accounted for a 23.4% share of the DWP in 2020. The segment grew by 1.1% in 2020, driven by a recovery in vehicle sales after an initial slowdown due to the pandemic,” said the analyst. “The government’s push to actively promote the use of electric vehicles and increase their sales to seven to ten million by 2030 will prompt insurers to develop products catering to this segment. As a result, motor insurance is forecast to grow at a CAGR of 4.5% during 2021-2026,” added Raj. Low mortgage/property interest rates will help drive growth in the property insurance market, said the analyst. “Property insurance is the third-largest segment, which accounted for 17.2% of the DWP in 2020. The segment is forecast to grow at a CAGR of 9.4% during 2021-2026, driven by an increase in property sales due to low property/mortgage interest rates.” Raj concluded: “Germany’s economic recovery is expected to remain subdued over the next couple of years, due to a surge in fresh Covid-19 cases and the negative impact of the Russia-Ukraine conflict. However, increasing healthcare costs, rising industrial growth and a boost in demand for real estate will support growth in the general insurance industry over the next five years.”

Healthy growth forecast for German non-life sector despite Ukraine war

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