Although decreasing toward lower paces as compared with 2016, the GWP growth may offset declining yields in the non-life insurers' investment portfolios. However, FITCH believes that the average portfolio investment yield across the sector will further decline to 3.2% in 2017 and 3% in 2018 from an estimated 3.5% in 2016 and 3.9% in 2015, reflecting persistently low yields for new investments.
In the motor sector, GWP growth was stronger than expected in 2016 but underwriting profitability did not improve due to higher claims expenses despite price increases. Motor insurers might focus on underwriting discipline and higher premiums in 2017, but benign claims experience could lead to premiums reductions in 2018.
According to the German regulator, non-life insurers had an average Solvency II ratio of 289% at end-2016, slightly up from 278% at end-2015. These figures are mostly calculated without Solvency II transitional measures. FITCH expects German non-life insurers to maintain strong capitalisation, with an average Solvency II ratio above 250% at end-2017.
The report gives FITCH's latest update on important German non-life market developments and its forecasts for GWP growth and combined ratios for major business lines.
The report 'German Non-Life Insurance- Mid-Year Update' is available here.