Germany’s property and casualty (P&C) insurers are regaining their footing after recent years of turbulence, with profitability rebounding and claims trends stabilising - prompting Moody’s Ratings to upgrade the sector’s outlook from negative to stable.
The ratings agency forecasts a sector-wide combined ratio near 95% for 2025, signalling a return to pre-crisis norms after a period marked by claims inflation and severe weather losses. Motor and homeowners’ lines—once battered by surging repair and construction costs—are now leading the recovery, as average motor premiums have soared by 30% and homeowners’ rates by 40% since 2022. While this robust pricing has restored margins, Moody’s warns that mounting affordability pressures could temper premium growth as the market heads into 2026.
Fewer severe weather events this year have also helped. With a relatively quiet start to 2025 in terms of hail and inland flooding, insurers have seen a reprieve from the heavy catastrophe losses that hit recent balance sheets.
The outlook for Germany’s life insurance sector, meanwhile, remains stable. The analysts said the segment continues to benefit from solid capital buffers and steady earnings despite limited growth potential. A flatter yield curve, supported by higher long-term rates, is improving investment returns and helping life insurers meet guarantees on traditional products.
Meanwhile, falling deposit rates have nudged consumers back toward insurance-linked savings, leading to modest gains in new business. However, most of that growth stems from single-premium policies rather than recurring contributions, a trend that could limit sustainable expansion.
Ongoing regulatory developments, including proposed changes to the “Riester” pension framework and debates over mandatory natural catastrophe coverage, are expected to shape the industry’s next phase. Moody's said insurers will need to balance digital transformation costs, tightening supervision, and shifting customer expectations as they navigate a slower-growing economy.
Germany’s GDP is forecast to expand by just 0.3% in 2025 and 1.4% in 2026, with inflation expected to ease gradually. Against this backdrop, the Moody's outlook signals cautious optimism, suggesting the worst of the pressure on Germany’s insurers may now be behind them.
