War, inflation and supply chain bottlenecks dampen outlook for German firms

German risk and insurance managers will gather for the annual GVNW Symposium in Munich next week, amid an increasingly bleak macroeconomic environment and rising pessimism among insurers.

Those GVNW members that had hoped that for a return to ‘normal’ at coming renewals after a particularly tough period are likely to be disappointed, according to latest analysis from the Munich-based thinktank IFO Institute, as reported by the German Insurance Association (GDV).

The GDV reports that German business expectations are at the lowest level since the pandemic began and the mood in the insurance industry cooled down considerably in the summer months.

The companies surveyed by the IFO Institute rate their current business situation significantly worse than in the previous quarter, reports the GDV.

“The downward trend from the spring survey is thus continuing. At the same time, insurers’ business expectations for the next six months fell to their lowest level since the beginning of the coronavirus pandemic,” it states.

“The war in Ukraine, high inflation, persistent supply chain bottlenecks and the great uncertainty about further economic development are dampening the mood,” commented GDV general manager Jörg Asmussen on the survey’s findings. “Overall, the sector currently paints a rather pessimistic picture of the business situation and prospects,” he added.

The GDV reports that the balance of positive and negative ratings dropped to -16.9, compared with 13.1 points in the previous quarter.

The proportion of companies that gave a negative verdict in the survey in July and August rose to 28%, versus 23% in the first quarter of 2020 at the start of the pandemic.

At the same time, the business expectations of insurers fell by more than 20 points to -12.5 points. The long-term average is 13.7 points.

German life insurers view their current business situation as “significantly worse” than in the previous quarter, reports the GDV.

“Business expectations for the next six months are also worse than they were in spring. The proportion of life insurers that consider negative business development to be likely in the coming months has more than quadrupled in summer to 22% compared to spring,” said Asmussen.

Property and casualty insurers are expecting significantly worse conditions, says the GDV.

“A very subdued mood is also emerging in property and casualty insurance. Although the assessment of the current situation has increased slightly, this too remains well below the long-term average. In the survey, only 0.6% of companies stated that the general conditions had improved compared to the previous quarter,” states the association.

It adds that there are signs of a noticeable slump in expectations for future business prospects. “Following the positive developments in recent surveys, there is a change in mood among property and casualty insurers in the summer months. Almost 27% of insurers expect the general conditions to deteriorate in the coming months,” said Asmussen.

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