Industry-specific environment

The continuing tense economic climate and the accompanying measures on the economic policy side again determined conditions for the international insurance industry in 2013: given that the state of capital markets remains challenging, particularly high importance attaches to preserving the value of investments and the stability of returns. Sales of traditional life insurance policies were also impacted by the low interest rate environment; at the same time, though, growing demand is emerging for products geared towards this market environment. In 2013 this could be discerned, inter alia, in the increasing demand for products designed to deliver capital relief and improve solvency.

The interest rate situation was also reflected overall in the technical pricing of premiums on the primary and reinsurance markets. Considerable discipline was needed in order to be able to offset further declines in investment income. In this regard new (re)insurance capacity has also entered the insurance-linked securities (ILS) market, with the result that additional alternative capital met with unchanged demand. The pressure on prices and conditions, especially in natural catastrophe business, consequently intensified further.

Implementation of the Solvency II framework directive was again a central preoccupation in the year just ended. Although the financial market and a prolonged low interest rate environment made the introduction of this system of insurance regulation difficult in its originally envisaged form, another major step forward was taken in 2013. In order to overcome the obstacles the European Parliament, European Council and European Commission reached a compromise in November 2013. The amendments that were negotiated are to be adopted in the spring of 2014 by way of the Omnibus II directive and then implemented in national law by March 2015. Especially with respect to the widely discussed assessment of long-term guarantees, which are a vital component for the life insurance sector, key details were elaborated that, most notably, give companies greater security in their planning.

Europe suffered exceptionally heavy damage from weather events in 2013. The June flooding was the most expensive naturaldisaster for the (re)insurance industry measured in terms of total economic losses. The most costly insurance loss worldwide in 2013 – and at the same time the most expensive ever hail event in German history – was the series of hailstorms that impacted some areas of northern and south-western Germany at the end of July. While the hurricane season in North America once again passed off very quietly, typhoon Haiyan triggered a major humanitarian catastrophe in the Philippines. The losses for the insurance industry in this case were, however, relatively slight owing to the very low insurance density.