Germany Q3 Market Dynamics


Landscape

Germany’s Bundestag elections in September 2021 delivered a fragmented political picture: the centre-left SPD claimed the largest share of seats by a narrow margin over the hitherto-dominant centre-right CDU. Coalition negotiations have begun between these and smaller parties. In the third quarter of 2021 the German government declared a fourth wave of COVID-19, and the government applied national rules requiring attendants at various public places to have been vaccinated, have recently recovered from infection, or have a negative test. Vaccinations dramatically reduced the impact of this wave, with 60% of the population fully vaccinated by mid-September, although there is concern about the slowing rate of uptake.


With the easing of lockdowns, the economy has returned to growth: the second quarter saw GDP growth of 1.6%, while the ifo forecast a rate of 3.3% for the year. Inflation has also risen, reaching an annual rate of 4.1% in September, while the Bundesbank has kept the basic rate of interest at -0.88%. Plans for economic recovery include EUR 270 billion in funding for transportation infrastructure over a 10-15-year period. Heavy rain in July 2021 triggered floods that were the country’s deadliest natural disaster since 1962, with a death toll of 196. The German Insurance Association (GDV) estimates claims from the storm to amount to EUR 7 billion, and that 2021 may be a record year for natural hazard losses as these amount to EUR 11.5 billion already.

Key Indices - Germany


Market Dynamics

Germany Featured Products Q3 2021


Q3 Casualty/Liability Summary

Overall (Challenging) Rates are increasing across all industries and client segments, as underwriting appetite contracts.

Rates (+1-10%) Pricing is modestly up across the board.

Capacity (Ample) Capacity is stable and generally available despite further de-risking and line re-sizing across some insurers.

Underwriting (Stringent) Underwriting is stringent and underwriters are particularly concerned with capacity deployment and pricing. Product Recall and Product Liability are experiencing the most challenging underwriting discussions. Insurers are writing new Liability business only if the risk type aligns with their strategy and appetite.

Limits (Stable) Expiring limits can be achieved on most placements. Deductibles (Increasing) Deductibles are increasing as a mechanism for reducing premium costs. Insurers are not imposing deductible increases.

Coverages (Stable) Terms and conditions are generally stable with no new exclusions or clarifications being generally imposed by underwriters.

A Look Ahead (Stable) A further de-risking and tightening of capacity for special coverages such as Recall and Product Liability is expected. Rate increases are expected to continue.


Q3 Cyber Summary

Overall (Challenging) The market is extremely challenged due to an increase in loss frequency and severity. Underwriters are scrutinizing risk and requiring extensive, detailed underwriting information. Placements require long lead times and well-planned strategies.

Rates (>+30%) Rate increases are severe, especially for cyber-sensitive industries.

Capacity (Constrained) Capacity continues to tighten as insurers further limit their risk.

Underwriting (Stringent) Underwriting is rigorous and strict. Risk quality is paramount. Required security measures are a pre-requisite to providing coverage.

Limits (Decreasing) Insurers are imposing limit decreases. Deductibles (Increasing) Insurers are imposing deductible increases across the board.

Coverages (Restricting) Coverage restrictions – especially related to ransomware – are being imposed.

A Look Ahead (Challenging) Market conditions are not expected to improve in the near term.


Q3 Financial Lines Summary

Overall (Challenging) Financial Lines, and particularly D&O, remains very challenged – with significant price increases, rigorous underwriting practices, and a substantial capacity contraction. While the impact of COVID-19 did materialize as expected, underwriters remain concerned about other risks such as future insolvencies and other corporate crises.

Rates (+11-30%) The pricing environment is very challenged, with rate increases in some cases exceeding100% of expiring premium.

Capacity (Constrained) The capacity contraction of 2020 has continued in 2021 across most risk types. In some cases, individual risks are experiencing additional reductions.

Underwriting (Stringent) Insurers are applying rigorous underwriting standards and are not flexible. Extensive underwriting information is being required, and the process is slow.

Limits (Decreasing) Many insureds are opting to reduce their program limits, driven by increasing premiums, restrictions on conditions, and insurance law issues related to the restructuring of programs.

Deductibles (Increasing) Deductible increases are being mandated, particularly for side B & side C.

Coverages (Restricting) There is heightened focus on coverage. While restrictions are being imposed in individual cases – especially related to extended reporting periods, continuity of coverage and insolvency exclusions - widespread restrictions are not being implemented.

A Look Ahead (Challenging) A further tightening of capacity, as well as rate increases across all client segments, is expected, combined with very rigid insurer underwriting strategies.


Q3 Property Summary

Overall (Challenging) Although combined ratios are improving, they remain below acceptable levels, so the Property market continues to be challenging, particularly for critical industries such as recycling, chemicals, wood, and paper.

Rates (>+30%) Rate increases were already significant, but have accelerated following recent major flooding.

Capacity (Ample) Capacity is generally sufficient as captives are implemented and new facultative reinsurance opportunities enter the market; however, some insurers continue to implement capacity management strategies on specific risk types, seemingly regardless of risk quality.

Underwriting (Stringent) Underwriting scrutiny remains high, particularly related to Cyber exposures.

Limits (Decreasing) Insurers remain focused on de-risking, and only deploying full limits on highly attractive business which is aligned with their underwriting strategies and risk appetite.

Deductibles (Increasing) While insurers continue to offer deductibles as per expiring, many insureds are opting to increase them to help offset premium increases.

Coverages (Restricting) Coverage restrictions are being imposed.

A Look Ahead (Challenging) Ongoing hard market conditions are expected to continue, including significant rate increases, limit reductions and challenging underwriting approaches, especially for industries such as chemical, food, pulp & paper where de-risking strategies continue.


Q3 Trade Credit Summary

Overall (Stable) Market conditions have moderated as COVID-related insolvencies have not materialized as expected. There is now healthy competition in the market, which is serving to further stabilize conditions.

Rates (Flat) Pricing has moderated as market competition has strengthened as the uncertainty of 2020 subsides. While most risks are renewing flat, some well performing risks are experiencing price reductions.

Capacity (Ample) Capacity in the market remains sufficient; however, insurers are limiting it on certain risks.

Underwriting (Prudent) Underwriting attitudes are cautious; thorough details – especially related to COVID recovery – are required.

Limits (Stable) Limits are stable and sufficient to meet insureds’ needs.

Deductibles (Stable) Expiring deductibles can be achieved for most placements.

Coverages (Restricting) There is an increasing trend for insurers to require standard coverage wording; however, there is some flexibility on some (large) risks.

A Look Ahead (Stable) Market stability is expected to continue with moderate pricing and sufficient capacity.