German insurance sector sentiments in Q1
German Insurers' Sentiment Dips in Q1 2025, Amid Economic Downturn and Uncertainty
The sentiment among German insurers has deteriorated at the onset of 2025, as indicated by the German Insurance Association (GDV) in its Ifo Institute economic climate survey. The business climate index for the period of January to March fell by 7.2 points, reaching 18.0 points.
Jörg Asmussen, CEO of the German Insurance Association, acknowledged the economic downturn's impact on the sector, yet expressed cautious optimism for the future. Insurers are not immune to the real economy's struggles, he stated, but the industry is well-prepared to tackle challenges.
In the survey, around 150 insurers from various sectors provided insights about their current business conditions and future prospects. While life insurers' assessment of their present business situation remains positive, especially in the area of new business, the business expectations barometer plummeted significantly by 46.2 points to 0.4 points in the first quarter.
The decline in business expectations, according to Asmussen, can be attributed to weak growth forecasts for the German economy and ongoing global uncertainties. In property and casualty insurance, despite a decline in claims numbers, business expectations remain less optimistic.
Despite the gloomy business expectations, some insurers have shown resilience. Munich Re, for instance, reported a net result of €1.1 billion in Q1 2025, despite major-loss expenditures from the LA wildfires. Allianz SE also witnessed a significant increase in its total business volume, with an 11.71% surge to €54 billion.
However, the global economy is expected to grow at a slower pace of 2.3% in 2025, possibly leading to weaker insurance volumes due to geopolitical uncertainties and trade tensions. Yet, the European P&C business may benefit from increased defense and infrastructure investments, as well as higher premiums due to natural catastrophes.
Less than half of Europe's top insurers anticipate rates to drive profits in 2025, suggesting economic uncertainty could impact profit outlooks. European households and businesses, however, are expected to see increased insurance penetration, potentially resulting in annual premium growth of 4.2%. This increasing demand for insurance coverage might favor insurers offering comprehensive protection.
In summary, the first quarter of 2025 presents a complex environment for German insurers, with economic uncertainties and geopolitical tensions posing challenges, but also opportunities such as increased demand for risk management solutions and potential premium growth.]
In light of the economic downturn and uncertainties, the German Insurance Association suggests that the industry may need to focus on adaptation for business survival, such as augmenting community policies and exploring vocational training programs to create a more resilient workforce. Furthermore, financial planning should be prudent, considering that insurance volumes might be affected by slower global economic growth and geopolitical tensions, making prudent financial management crucial for the industry's future success in the business landscape.
