Best's Market Segment Report: AM Best Maintains Negative Outlook on German Life Insurance Segment
AM Best expects that economic headwinds will continue to challenge German life insurers in 2021. The segment remains exposed to low interest rates, which are reducing (re)investment yields and putting pressure on investment margins. This makes it increasingly difficult to cover existing policyholders’ guarantees solely from investment income, given the high average guarantees on in-force business.
A new Best’s Market Segment Report, “Market Segment Outlook: Germany Life Insurance,” notes that the low interest rate environment is expected to continue to place downward pressure on the segment’s profitability and solvency levels over the next 12 months. German life insurers continue to adapt their business mix by moving toward hybrid products with modified guarantee features, as well as other capital-light products. However, these efforts are only expected to change the overall composition of the market very gradually, as just a small proportion of the back book matures each year due to the long duration of policies.
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