German non-life insurance sector surpasses forecasts as Fitch upgrades outlook

According to Fitch Ratings, a credit rating agency known for its financial analysis and industry outlooks, Germany’s non-life insurance sector performed better than previously projected in 2024.

Fitch revised key performance indicators upward across the board, reflecting stronger-than-expected underwriting profitability, robust premium growth, and favourable investment conditions.

The agency now forecasts an average net combined ratio of 95% for 2025, improving from its earlier expectation of 97%. Its estimate for 2024 was also upgraded to 97% from 99%, while 2026 is expected to show continued improvement to 94%.

Throughout its latest assessment, Fitch Ratings attributes this positive shift to firm pricing momentum and disciplined underwriting. Premium growth across the sector is now expected to remain strong, with Fitch maintaining its 2025 forecast at 6% and its 2024 estimate at 7%.

These projections are based on the substantial rate increases implemented by insurers, particularly in the motor segment, where renewal pricing for 1 January 2025 showed hikes exceeding 10%.

Building insurance rates also saw significant upward adjustments, contributing to overall growth. For 2026, Fitch projects premium growth to moderate slightly to 4%.

Fitch Ratings also substantially raised its forecast for the sector’s net underwriting result. For 2024, the estimate was lifted to EUR 2.5 billion, up sharply from a previous forecast of just EUR 500 million.

Looking ahead, Fitch projects this figure to rise to EUR 3.4 billion in 2025 and EUR 4 billion in 2026, reflecting sustained profitability gains.

These improvements are underpinned by a combination of pricing strategies and more favourable reinvestment conditions in the fixed-income market.

According to Fitch, reinvestment yields are outpacing those of maturing securities, bolstering returns and supporting the sector’s financial health. As a result, Fitch forecasts investment returns to increase to 2.7% in 2025 and 2.9% in 2026, following an estimated 2.5% in 2024.

Despite these strong indicators, Fitch Ratings cautions that downside risks remain. A sharper-than-anticipated slowdown in premium growth or a resurgence in claims inflation could weigh on profitability. Under such scenarios, the net combined ratio might fail to improve in 2025, and underwriting results could fall closer to EUR 2 billion.

Fitch highlights past volatility in the motor and building insurance lines, where claims inflation outpaced insurer assumptions in both 2022 and 2023, resulting in sizeable underwriting losses in 2023. Nevertheless, the agency expects insurers to respond with continued rate increases to offset these pressures and preserve earnings strength.

Another concern raised by Fitch Ratings is the rising impact of smaller to medium-sized natural catastrophe events. These have become more financially burdensome due to increasing reinsurance costs and reduced coverage availability. Many insurers now retain more of these risks, which makes their results more sensitive to frequent weather-related losses. Fitch warns that this shift could lead to more unpredictable financial outcomes and strain underwriting margins.

Overall, Fitch Ratings emphasises the resilience and adaptability of German non-life insurers, noting that the sector is positioned to continue delivering solid results into 2026.

The agency’s latest projections signal a stronger footing for the industry, provided it can navigate inflationary claims trends and a more challenging reinsurance environment.

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