AM Best revised the outlook for the German non-life insurance sector to stable from negative on expectations that premium increases will continue to keep pace with claims inflation, leading to stable profitability.
AM Best said in a recent report that the stable outlook reflects expectations that the segment will deliver revenue growth on the back of rising interest rates.
AM Best said: “The country’s economic recovery is likely to be slow, providing modest but positive underlying economic support for growth in this sector. Additionally, interest rate hikes should continue next year, leading to higher income growth than underlying economic growth would suggest.”
AM Best expects positive interest rate adjustments to continue in 2026 across most of the non-life insurance sector, albeit at a more modest pace than in previous years.
The rating agency also noted that competitive pressure is increasing in the automotive business; nevertheless, the market is expected to remain rational in 2026.
AM Best added that extreme weather events and volatility in reinsurance pricing remain at manageable levels.
The agency stressed that performance in the German property insurance market remained volatile due to extreme weather losses. While 2025 is a benign year in this regard, the possibility of severe natural disaster losses remains, as product risk in the real estate sector is primarily the risk of such events.
AM Best continued: “In 2026, insurers will benefit from softening reinsurance conditions evident at 1.1 reinsurance renewals in 2026. Weak reinsurance market conditions have led to significant price reductions, particularly for non-impairable property accounts, which will benefit insurers’ technical outcomes.
“In addition, there have been beneficial changes in terms and conditions, with fewer restrictions on coverage. Finally, total cover is slowly returning to the sector, albeit on less favorable terms than the total cover that insurers will benefit from until 2021.”
