Germany
Developments on the German life and annuity insurance market were shaped in the year under review by the ongoing implementation of the amended Insurance Contract Act, which entered into force on 1 January 2008. This reform brought significant changes in market practices with respect to the transparency of policies, premature contract termination and the participation of customers in life insurers' hidden reserves.
While German life insurers were largely able to steer clear of the direct balance sheet repercussions of the global financial market meltdown, the crisis had appreciable effects on customer behaviour, hence triggering a significant shift on the level of supply and demand.
Unit-linked products tied to euro equities achieved less resonance in new business. Particularly in the case of deferred unit-linked annuities launched by some providers in the years 2006 to 2007, considerable product adjustments and simplifications had to be made.
At the same time, there was a resurgence of interest in traditional life and annuity insurance products, under which a certain level of interest income – currently 2.25% per annum – is guaranteed for customers. These guarantees are supplemented by annual bonuses, which at most companies are in the range of 1.75% to 2.50% – hence producing an attractive overall return in the order of 4.00% to 4.75%.
Equally notable was the marked rise in lapses, which for the market as a whole grew in the space of twelve months from 5.5% to over 6% of the portfolio, i.e. by around 15% to 20% in relative terms.
New business benefitted in the year under review from single premiums, which reached a record level with growth of around 60% year-on-year. Altogether, the premium income booked by German life and annuity insurers totalled EUR 81.2 billion according to provisional figures released by the German Insurance Association (GDV); this represents growth of 6.7%.
Our life reinsurance activities in the German market are led by E+S Rück, which generated premium income of some EUR 390 million. The slight rise in premium volume year-on-year despite the prevailing difficult market climate was attributable to the acquisition of two new clients, thereby boosting the total number of German clients to 41 companies. In the German market, too, we noted stronger demand for reinsurance solutions geared towards the capital market.
Another noteworthy development was the sharply growing interest shown by insurers in reshaping their application processes; in this respect E+S Rück is optimally placed thanks to its long-standing experience in the area of system-supported application processes. Based on this positioning it was possible to write several reinsurance treaties in the year under review with new and existing clients.
With net premium of EUR 344.5 million and given the favourable experience of the biometric risks of mortality and morbidity, another gratifying operating result (EBIT) was generated overall.