Germany
Within the Hannover Re Group the German market is served by our subsidiary E+S Rück. As the dedicated “reinsurer for Germany”, the company has been a sought-after partner for decades thanks to its good rating, pronounced customer orientation and the continuity of its business relations. E+S Rück is very well positioned in our domestic market and continues to rank as the number two in Germany – the world’s second-largest non-life reinsurance market. It even ranks first in the reinsurance of motor business.
The state of the German market was favourably influenced in the year under review by an increased gross domestic product, although it was also adversely impacted by after-effects of the financial and economic crisis. The historically low level of interest rates again led to sharply reduced interest income, which constitutes a major component of the pricing in longtail lines such as motor liability and general liability.
In motor primary insurance the year under review ushered in the anticipated trend reversal in premium income. Both in motor liability insurance and in own damage business premiums climbed by 3.5%. The premium gain was not, however, sufficient to bring about a return to underwriting profitability. The claims situation in own damage business continues to give cause for concern; in motor liability, on the other hand, it is possible to discern the re-emergence of a long-term downward trend in claims frequencies. Although the improved terms and conditions in the primary sector had positive implications for our motor portfolio, profit margins came under strain overall from the low level of interest rates. As a further factor, the difficult situation in motor own damage business was significantly impacted by hail events in August and September.
Industrial property and liability insurance was again fiercely competitive in the year under review. We responded by writing our business highly selectively. In retail property insurance, on the other hand, primary insurers booked rising premiums against a backdrop of falling loss ratios; this was also true to some extent of homeowners’ insurance.
We are again thoroughly satisfied with the development of accident insurance. In this area we offer our cedants not only reinsurance covers, but also services such as training programmes and an Internet-based version of our accident manual – thereby enabling clients to extensively finalise the processing of applications at the workplace or even at point of sale.
The claims situation in the engineering insurance lines was satisfactory in the 2011 financial year. Despite its highly international orientation overall, this line is exhibiting growing potential domestically too – especially in the field of renewable energies: we work together with our partners on solutions that safeguard the insurability of energy-efficient technologies. A concept for the insurance of energy-saving warranties, which we had already launched on the US market, has now been adapted for the German market. By means of this insurance product we are also seeking to create incentives for greater investment in energy-saving technologies.
Not only that, through our cooperation with a primary insurer we have brought to market covers against weather-related losses of revenue and profit. In this case, too, we are drawing on our expertise from collaboration with a US partner. Target customers for these products include the construction sector, regional energy suppliers and the automobile industry. Given the changing energy policy in Germany, the (re)insurance of wind farms will also play an ever greater role; this is especially true of highly complex offshore wind farms.
In the year under review we cemented our position as one of the leading reinsurers in the profitable German market. Gross premium volume climbed 6.5%, leaving us satisfied overall with developments on our domestic market in the face of conditions that were by no means easy.
The major loss situation in Germany was notable for hail events in August and September, which altogether were responsible for around 6% of the loss ratio in own damage insurance for the market as a whole and caused a combined net strain of EUR 14.2 million for our company. Along with an increase in basic losses, mention should also be made of two major loss events in industrial fire insurance which – with a combined market loss of almost EUR 350 million – played a crucial part in the substantial deficit recorded in this line. The combined ratio for our German business deteriorated to 101.9% (94.0%).