German non-life insurers will continue push premiums growth

German non-life insurers will continue increasing premiums to offset declining yields in their investment portfolios, Fitch has suggested in a new report.

In the report, called 'German Non-Life Insurance- Mid-Year Update', the rating agency said it anticipates gross written premiums (GWP) for the sector to grow by 2 percent in 2017 and 1 percent in 2018 following an increase of around 3 percent in 2016, driven by higher pricing.

However, it forecasts that the average portfolio investment yield across the sector will decline to 3.2 percent in 2017 and 3 percent in 2018 from an estimated 3.5 percent in 2016 and 3.9 percent 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, Fitch said. “We expect motor insurers to focus on underwriting discipline and higher premiums in 2017, but benign claims experience could lead to premiums reductions in 2018,” it said in the report.

It also pointed out that, according to the German regulator, non-life insurers had an average Solvency II ratio of 289 percent at end-2016, slightly up from 278 percent 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 percent at end-2017.

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