Flood catastrophe puts accident insurers in the red

Status: 01/27/2022 2:40 p.m

Last year’s flood disaster brought accident insurers into the red for the first time in years. As a consequence, the premiums for homeowners insurance are expected to rise.

The insurance industry looks back on a loss-making year. The flood disaster in the summer of 2021 caused property and casualty insurers in Germany to be in the red for the first time since 2013. As can be seen from current data from the General Association of the German Insurance Industry (GDV), the sum of the benefits significantly exceeded the premium income in 2021: the so-called damage-cost ratio for accident insurers rose to 102 percent last year – after almost 91 percent the year before.

Insurers lost money for the first time since 2013, because the combined ratio shows losses as soon as it rises above 100 percent. The industry made record claims payments of 12.5 million euros last year. “2021 is the most expensive natural hazard year in Germany since our statistics began in the early 1970s,” said GDV President Wolfgang Weiler.

Accident insurers expect growth

The expenses of the insurers were particularly high in the areas of homeowners insurance and commercial property insurance. In these areas, the loss-cost ratios were over 140 percent, while they were still below 100 percent, at least for building insurance in 2020.

The insurance industry therefore wants to protect houses better against natural hazards in the future only for an additional charge: According to this, the federal government should create the legal possibility for insurers to “change all existing private residential building insurance contracts on a key date”. The contracts then also included insurance cover against natural hazards – which would mean higher premiums for consumers. For homeowners who do not want this, the industry wants a contradiction solution.

The demand for natural hazard insurance increased significantly after the floods in North Rhine-Westphalia and Rhineland-Palatinate. However, only about half of all homeowners are still appropriately secured, said Weiler. Overall, the association therefore expects premium growth of around three percent for this year. Because of the devastating flood, more people would insure themselves against natural disasters.

Life insurers with muted prospects

In contrast, the outlook for life insurance is subdued. After the number of new contracts collapsed in 2020 due to the Corona crisis, it fell by a further 1.2 percent to 4.7 million new contracts last year. The development of the current year is also likely to be shaped by the course of the pandemic: “The decisive factors here are the economic prospects of private households and the political framework conditions for private old-age provision in the current legislative period,” said the GDV President.

The association president was more optimistic with regard to the entire industry. “We are currently expecting premium growth of between two and three percent for the insurance sector as a whole in 2022,” emphasized Weiler. Last year, the contributions of the entire insurance industry grew by around one percent and amounted to 223.4 billion euros.


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