Citing consistent downward trends over the last three years, Standard & Poor’s Rating’s Services forecasts problems for German P&C insurers.
“Underlying performance in the German property/casualty sector has been consistently trending downward over the past three years, and is expected to be the main catalyst for potential rating downgrades,” the announcement said.
“Inadequate pricing and questionable rebate policies coupled with a continued increase in claims severity and frequency will lead to a significant deterioration in underwriting results in 1999 and 2000. The industry’s combined ratio is projected to rise well above the 100 percent threshold in both years, ” the report continued.
While the industry is very well capitalized, this paradoxically has lead to a competitive pricing battle to maintain market share, which has affected, and will continue to affect underwriting results.
S&P predicted further consolidation in the rapidly changing p/c industry, saying, “Competitive pressures will continue to drive consolidation in the German insurance sector.” It also predicted that the lightening, or possible elimination, of the corporate capital gains tax, now under consideration in the German legislature would accelerate this trend, and could even lead to foreign insurers increasing their share in the German market.
Germany’s insurance giant Allianz seems to have escaped the trend, however. According to results published Friday, 1st quarter premiums showed a healthy 5.3 percent increase in P/C to €11.9 billion ($10.7 billion) and life sales were up 11.9 percent to €4.9 billion ($4.4 billion).
Allianz is still predicting a 10 percent rise in net profit for the year 2000, and has recently taken several initiatives to heighten its international profile. (See related story)
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