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Munich Re Report of the Board of Management
The insurance markets
Germany GDP in Germany rose by 1.9 % in real terms in 1995. This moderate rate of
growth was again attributable mainly to foreign demand, and to a lesser
extent to investments and the building industry. Owing to the unfavourable
development of the labour market and additional burdens resulting from
increased taxes and social insurance contributions, private consumption
provided no decisive impulses for an economic upswing. One positive
factor that should be mentioned, however, was the continued slowing of
upward price movement.
Gross premiums in DM million
7,368
7,861
8,708
8,947 8,846
1991 1992 1993 1994 1995
Against this background, premium growth in German direct insurance
continued to decline in 1995, although it still remained above the growth
rate of the gross domestic product. Whereas business in indemnity
insurance developed only moderately, insurances of the person recorded
stronger growth. This was due, above all, to the success of annuity
products in life insurance and to the growth of health insurers’ business as
a result of the introduction of compulsory long-term care coverage.
Our German reinsurance business did not match these rates of growth and
declined slightly by 1.1 % to DM 8.8 billion. There are several reasons
for this development. On the one hand, insurances of the person, which
enjoyed a stronger growth rate, are reinsured only to a small extent,
whereas direct insurers’ premium volume for the highly reinsured industrial
business stagnated. On the other hand, owing to their growing financial
strength, the large German direct insurers have been increasing their
retentions, i.e. the part of their business that is not reinsured. We were
only able to partially compensate for this loss of premium through the
acquisition of potentially profitable new business. In addition, in the year
under review we again terminated a number of business connections that
showed no tangible sign of appropriate further development. Thus the
quality of our German portfolio has been further improved.
The completion of the single European market for insurance as at 1st July
1994 did not have an appreciable effect on the development of our
portfolio in the year under review. As expected, the range of products
on offer has expanded; this applies particularly to motor insurance.
Altogether, a greater differentiation between risks and an intensification of
price competition are becoming noticeable in those classes of insurance
where plans were previously subject to prior approval by the supervisory
authorities. In the medium term the underwriting results of the direct
insurers and – insofar as their fortunes are shared by the reinsurers
through proportional reinsurance – of the reinsurers, too, will again come
under greater pressure. From the point of view of the reinsurers, however,
this circumstance will open up new opportunities, since direct insurers will
have to attach a greater significance in the long term to safeguarding their
underwriting results against the effects of fluctuations in claims experience
if their margins are increasingly narrow. We are not, however, expecting
this to have any appreciable effect on our German business in 1996. In
motor insurance, admittedly, the positive trend of results in the last few
years is not likely to continue in 1996, since fiercer competition will have an
effect on the results of both direct insurers and reinsurers.
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