Leading specialty players commit to German market despite tough conditions and some exits

The German commercial and corporate insurance market remains fiercely competitive, and with the German insurance association (GDV) predicting a market-wide combined ratio of 115% for fire business, insurers need to tread carefully if they hope to deliver a decent return. There have been some notable withdrawals in recent times such as Amlin and Mapfre, which decided to focus their investment on markets that offer higher returns. But despite these tough market conditions, leading international specialty insurers such as Newline, Liberty, Markel and QBE have plans to expand in the massive German insurance market. They see decent opportunities for a focused, disciplined insurer that can add genuine specialist knowledge and capacity. Brexit is also having a positive impact on the German market. Markel and Newline chose Munich and Cologne for their respective EU headquarters in preparation for Brexit. It is likely that other international insurers and reinsurers will follow suit as they see the advantages of being based in Europe’s biggest insurance market. Newline, part of the Odyssey Group, certainly registered its confidence in the longer-term health of the German insurance market when it recently announced Cologne as home of Newline Insurance Company’s EU insurance hub. It now has approval to create an insurance company subsidiary that will be capitalised, licensed and regulated in Germany. Manuel Wirtz, general representative for Germany at Newline Group and head of the new German company, explained the strategy and plans for 2018 and into 2019. “The first priority is to continue working with Newline Group to deliver a sustainable post-Brexit solution for our clients. Secondly, we will look to draw upon the extensive underwriting expertise of Newline in London, bringing more of the Newline product suite to the German market,” he said. Mr Wirtz recognises that the German market remains highly competitive, but he believes that Newline has the skills and knowledge to grow profitably. “Newline has successfully adapted to changing market conditions, while maintaining a consistent, disciplined underwriting approach. This has not changed, despite the extraordinary length of the current soft market. Armed with our local market knowledge, innovative thinking and our service proposition, we are able to find the business that meets our risk appetite, thus offering our clients long-term financial security,” he said. Mr Wirtz agrees with his peers that there will be no dramatic hardening in the German market any time soon. But he does see “green shoots” from an insurer’s perspective. “We did see casualty reinsurance rates increase at 1 January this year. This was driven by a combination of last year’s natural catastrophes and the recent trend in reinsurance pricing. We hope this will have a positive impact on direct insurance prices. As of today in Germany, we are already seeing some minor improvements in pricing and some portfolio restructuring from market participants, which could be seen as the first step toward a hardening market,” said Mr Wirtz. Like others, he sees some benefit from recent M&A activity in the market for his firm. “M&A activity can increase uncertainty for brokers and policyholders as companies are restructured. There is also the potential for uncertainty across the staff, which can impact service levels. In addition, in some cases merging together local operations can create opportunities for the rest of the market, particularly where clients wish to restrict their exposure to any one carrier. Newline is well positioned to take advantage of any opportunities that may arise,” he commented. Ronan Gerety, general manager for Liberty Specialty Markets in Germany, also sees potential from the M&A action. Liberty has been present in the German market since 2003 and sees no reason why it cannot continue to grow. “My opinion is that the current low premium rate environment is set to continue further into 2019 and beyond, however current market shifts caused by European insurer consolidation and Brexit have created significant new opportunities. In challenging times, insureds appreciate the stability of an A-rated mutual insurer and reinsurer the size of Liberty Group. So even in an environment where there is continued pressure on rates, we see opportunities to grow our German insurance activities and client base from our Cologne office gateway,” explained Mr Gerety. A big advantage for Liberty in Germany is its mutual heritage and ability to take a longer-term view. “Being a mutual insurance and reinsurance group, Liberty can take a more long-term and strategic investment position in a particular market. The Liberty Group’s presence in Cologne can be traced back over 15 years already. The strategy of the group is to identify and transact in those business lines and across those segments of the German insurance market where we anticipate a stable profit margin. “Naturally, we understand the German insurance buyers’ reluctance to see insurers coming in and out of business lines and their market, which is why we try to diversify our German portfolio as much as possible and across as many business lines as possible, in order to better enable us to manage the insurance cycle and provide a more stable platform for our German clients,” explained Mr Gerety. To view our GVNW conference newspaper please click here.

Leading specialty players commit to German market despite tough conditions and some exits

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