The German insurance market has been undergoing a major shake-up as Holger Gaserow explains
There has been considerable restructuring in the German insurance market recently. Several of the public legal insurers in Germany, who play a dominant role in the market particularly in the property sector, have been involved in mergers and acquisitions.
The Provinzial insurance groups in Kiel and Munster merged with effect from 1 January 2005. The newly merged insurance group has a premium income of EUR3bn and has around 3,000 employees. The headquarters of the new holding company are in Munster. The existing property/casualty insurers will continue to work separately but under the umbrella of the holding company.
Earlier mergers were the SV SparkassenVersicherung insurance groups in Stuttgart and Wiesbaden, while Versicherungskammer Bayern took over the majority of Feuersozietaet Berlin Brandenburg after its privatisation.
And it would appear that the trend towards consolidation in the German market is not finished yet and will probably go on in the future.
A significant development was the strategic decision by parent group Gothaer to close its reinsurance subsidiary Gothaer Re which stopped writing new business in June 2004. Among the reasons behind this move were the tougher rules on capitalisation under Solvency II arrangements for insurers as well as the new accounting regulations under the international accounting standards IFRS.
The closure can also be seen as one further step in the consolidation process in the German reinsurance market, which is still the third largest reinsurance market globally.
A further interesting development was the takeover of German insurer Wuba by a group of international investors. Wustenrot & Wurttembergische (W&W), an insurance and mortgage banking group in Germany, sold its small marine and commercial lines insurer, Wuba, to investment company JC Flowers and its German advisers Augur Capital.
The investors intend to use Wuba as a platform for growth in the German market. Among the investors in the JC Flowers private equity funds are global firms such as the insurer AIG and General Electric.
In addition, Austrian insurer UNIQA increased its presence in the German market with the acquisition of Mannheimer Versicherung (Non Life) and integrated the reinsurance arrangements with effect from 1 January 2005.
A newcomer to the German market has been introduced by the Hamburg-based insurance management firm Zeller Associates which has opened up a new P&I pool named Hanseatic P&I.
Hanseatic P&I is said to be ready to write business and has a capacity of EUR500m. It consists of a pool of several insurers, with Gothaer in a leading role and Munich Re as the leading reinsurer of the business. Hanseatic P&I is trying to regain business that was lost when the German P&I insurer Antra became insolvent in 2003.
Converium came under well-publicised pressure in 2004 when its rating was downgraded by Standard & Poor's to BBB+, which for many customers is not sufficient. An improved rating is the main target for Converium at the moment. On the German market however, where Converium has a solid local presence, the company achieved a 95% retention ratio in non-life business.
- Holger Gaserow, chief executive officer of Aon Ruck.
- After pressure from the 16 German insurers who are shareholders in Extremus, the terrorism insurer merged its reinsurance layers. Instead of two reinsurance layers bought in the private market, Extremus bought only one private cover this year.
- Extremus initially started writing business in November 2002 but demand has remained below expectations ever since.
- When it launched, Extremus had a total cover of EUR13bn divided into three layers. In the beginning, the German government agreed a liability of EUR10bn over EUR3bn but the total cover was reduced to EUR10bn during the year 2004.