Best’s Market Segment Report: AM Best Assigns Negative Outlook to German Life Market

AMSTERDAM–(BUSINESS WIRE)–AM Best has assigned a negative outlook to the German life
insurance market. This reflects pressure from low interest rates
remaining the key challenge for the sector, insurers’ limited ability to
decrease reliance on traditional policies and operating results
remaining under pressure.

A new Best’s Market Segment Report, titled “Market Segment
Outlook: Germany Life” states the European Central Bank’s decision to
maintain favourable liquidity conditions gives little reason to expect
rates to rise in the near term. In this environment, the large duration
gap on life policies sold in the past makes the guarantees of these
policies increasingly costly. As a result, more and more German life
insurers have de-emphasised the sale of these products. As insurers
explore optimal solutions to manage their back-books, AM Best expects
more portfolios to be placed in run-off, potentially leading to market

The report also looks at the impact of the German government approving
an amendment to reserving rules in October 2018, introducing an interest
rate corridor that effectively decreased the required Zinszusatzreserve
(ZZR) contributions from 2018. ZZR is an additional interest rate
reserve introduced in 2011, to ensure insurers reserve more effectively
for high guaranteed crediting rates during periods of low interest
rates. Whilst the recent change will substantially ease the strain on
reported operating performance of German life insurers under local GAAP
reporting in coming years, results will remain under pressure. AM Best
views the economic solvency position of German life insurers as better
represented by Solvency II (SII) reporting after excluding transitional
measures, although aspects of SII remain problematic. The aggregated
balance sheet of the German life segment remains strong, as measured by

AM Best anticipates that the German life insurance sector will continue
to address its vulnerability to the low interest-rate environment and
its correlated issues by reducing its cost structure as well as focusing
on capital-light products. The majority of German life insurance players
are attempting to reduce cost by advancing their digital and
technological capabilities in order to improve agility and achieve
efficiencies that will mostly originate from increased automation and
streamlined processes.

To access the full copy of this market segment report, please visit

AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
for more information

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its


Martina Seydoux
Financial Analyst
+44 20 7397


Director, Research, Communications
& Media
Europe, Middle East & Africa
+44 20 7397 0322


Financial Analyst
+31 20 308 5431


Director, Market Development &
20 7397 0280

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