Big four cedants boost reinsurance growth in Germany
The four largest cedants in Germany are boosting reinsurance demand in the country as they take advantage of soft market conditions, according to AM Best’s analysis of the 20 largest cedants.
Based on the last full-year data available, Germany’s 20 largest cedants collectively posted a 13.1 percent increase in non-life reinsurance ceded, while at the same time gross premiums written (GPW) rose by a more modest 6.7 percent.
The increase in reinsurance and retrocession buying has been primarily driven by the four largest cedants: multi-line insurers Allianz and HDI Versicherung and reinsurers Munich Re and Deutsche Rück.
“These companies have increased the amount of reinsurance bought, reflecting a trend in Continental Europe whereby demand for reinsurance is outpacing growth in GPW,” said Carlos Wong-Fupuy, AM Best senior director. “The demand for more reinsurance has been a result of soft market conditions, regulatory demands under Solvency II and the need to support product diversification.”
The remaining 16 largest cedants in Germany also rely on reinsurance to protect their balance sheets from volatility, although the inherent nature of risks underwritten enables them to absorb retail risks, which in many cases is their focus, according to AM Best.
Overall, Germany’s cedants continue to maintain high retention ratios, although reinsurance and retrocession cover remains paramount for exposure to natural catastrophes, it added.
The briefing notes that if the German market’s four biggest cedants are excluded, insurance ceded by the other 16 companies grew by just 0.5 percent, while GPW increased by 5.2 percent.
As the risk profile of their portfolios is more predictable, domestic and regional insurers can afford to adopt passive reinsurance strategies, and have relatively less sophisticated enterprise risk management approaches than the larger international groups.
Yvette Essen, director of research and communications, said: “Public law companies have continued to maintain a heavy focus on personal lines business. Similarly, mutuals predominantly underwrite home and motor risks, focusing on regional clients and small to medium-sized enterprises. As risk carriers of mainly personal lines and retail products, medium-sized insurers have comparatively less need for reinsurance protection.”
The findings have been published in a briefing titled, “Natural Catastrophe Exposures Underpin Stable German Reinsurance Buying Trends.”
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