Germany’s life insurance sector is expected to remain stable,
with German life companies well prepared to
meet the sector’s current challenges, according to Fitch
Ratings.
Although Fitch views
the low interest rate environment and the pronounced volatility of
the capital markets as the main challenges for German life insurer,
the ratings agency does not foresee a significant number of
rating changes over the next 12-24 months.
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Stephan Kalb, senior director in Fitch’s
insurance team, said: “There is considerable pressure on the
insurance companies’ ability to earn a decent return on their
investment and to cover policyholders’ guarantees.”
“However, Fitch expects rated German life
companies to meet their guarantees, even in a prolonged period with
low investment yields,” said Kalb.
Overall, German life insurers’ current
investment portfolios are well balanced and able to generate
sufficient investment yield to meet the guarantees of existing life
insurance portfolios.
Strengthening balance
sheets
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By GlobalDataFitch said it recognises in its ratings that
German insurers have strengthened their balance sheets and reduced
their exposure to risky asset classes over the past few years.
It said German life insurance companies have
less than 3% of their assets invested in Greece, Italy, Ireland,
Portugal, and Spain’s sovereign debt and even larger losses in the
respective market values could be digested.
Fitch said it expects German new life premiums
to decline in 2013 as a result of a normalisation in the German
life market.
While during 2009 and 2010 the German life
market grew because of the strong growth of single premium
business, in 2011 the business was benefitting from a positive
pull-in effect from the reduction of the maximum guaranteed
interest rate on 1 January 2012, said Fitch.
The ratings agency expects a similar positive
effect before the introduction of unisex tariffs in December, but a
slow-down thereafter.
