German non-life insurers tipped to enjoy healthy growth

Gross written premiums (GWP) of German non-life insurers are expected to grow 2 percent in 2016 and 1 percent in 2017, followed by sound growth driven by higher pricing in 2015 of 3.5 percent, according to a Fitch Ratings report.

But Fitch expects the average portfolio investment yield across the sector to decline to 3.8 percent in 2016 and 3.6 percent in 2017 from an estimated 4 percent in 2015 and 4.2 percent in 2014, reflecting persistently low yields for new investments.

GWP growth in the motor sector was stronger than Fitch expected in 2015 but underwriting profitability weakened despite the price increases.

Fitch expects motor insurers to focus on underwriting discipline and higher premiums in 2016, but benign claims experience could lead to premiums reductions in 2017.

Non-life insurers had an average Solvency II ratio of 280 percent at end of the first quarter of 2016, which was stable compared with end of 2015 (278 percent), according to the German regulator.

Fitch expects German non-life insurers to maintain strong capitalisation, with an average Solvency II ratio above 250 percent at the end of 2016, slightly weaker than former Solvency I ratios, which averaged around 310 percent at end-2014.