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The outlook for the German property/casualty insurance sector remains negative, according to rating agency Moody's Investors Service Inc.
In a report released Monday, Moody's said that macroeconomic headwinds continued to affect German property/casualty insurers negatively. In the report, “German Insurance: P&C Results Remain Constrained; Unresolved Structural Issues in Life,” Moody's said that while the German economy remains resilient, it expects growth in the country's gross domestic product will remain “subdued.”
The rating agency said that while P/C rates have begun to increase in some lines after several years of intense competition, those increases remain moderate compared with a deterioration in insurers' results.
Moody's said that rate increases have been seen in auto insurance since 2011 but that rates for many other property/casualty lines of business remain flat.
German insurers also are negatively affected indirectly by the economic and sovereign crises because they have a relatively high exposure to German and other European banks, Moody’s said. In addition, current low interest rates negatively affect the investment returns of German insurers, Moody’s noted.
German property/casualty insurers’ profitability also has been under pressure from a series of natural catastrophe events in the country during 2012 including a period of frost at the beginning of the year and storms and hailstorms during the summer.
National parliamentary elections in September 2013 may prompt the adoption of several insurance-related reforms, according to the report. Those include a change in the remuneration of insurance intermediaries to a fee-based model from the current largely commission-based model.