The German Insurance Market



Looking to the future

Dear Reader,
The war in Ukraine, COVID-19, inflation and energy shortages have all laid bare the weaknesses in the global economy and proved the ultimate test of resilience for business.

Yet, just as in every crisis, these challenges also present an opportunity to correct the errors of the past. Plenty of businesses are now planning to increase their stock levels in future and build more buffers into their supply chains. And the production of many essential goods – including food, textiles and pharmaceuticals – is being relocated back to Germany in order to prevent supply bottlenecks and reduce dependencies. As governments and businesses consider their future strategies, there are growing calls for trading relationships to be more closely aligned with efforts to improve human rights and social standards and meet sustainability targets. In recent years, the EU has passed a number of different laws promoting ESG standards and, in another significant step, the German government recently introduced its Supply Chain Due Diligence Act (LkSG). This new law, which applies across all sectors to companies with more than 3,000 employees, sets out various due-diligence obligations that businesses must observe in order to protect against human rights violations and environmental pollution in their supply chains. The impact of this legislation on companies' processes is far-reaching and significant. However, in the medium term, the mandatory risk analysis will help companies to better identify their existing dependencies and specific risk factors as well as to anticipate potential supply issues.

The shifting geopolitical situation has also forced European governments to ramp up their energy transition efforts in a bid to reduce their countries' dependence on fossil fuel suppliers. For businesses, too, action to protect the earth's climate is vital because climate change threatens to have a significant impact on their operations in the medium term. That said, as countries turn their backs on Russian oil and gas and seek instead to rapidly expand their use of renewables, so the influence of China increases. Chinese companies are the world leaders in the production of wind turbines and PV installations, and our dependence on China for these green technologies is a growing risk factor for energy security and, consequently, the energy transition in Europe. The rebuilding of Ukraine presents an opportunity to implement a package of measures to promote both growth and environmental sustainability. If Ukraine were to establish its own PV and wind turbine industry, it could become Europe's primary production location for these technologies. The country is certainly a good candidate: numerous wind farms and solar parks have been built in Ukraine since 2008, and the country has already amassed plenty of expertise in this area. German companies should have a key role to play in the rebuilding of Ukraine. But there's one big issue holding them back – and that's the lack of insurance options. That’s because for as long as the conflict continues in Ukraine, the only cover available to companies are costly war insurance policies. The war in Ukraine marks a turning point or "Zeitenwende" – and the insurance market now needs to look to the future and identify and assess the risks associated with this crossroads. The current focus on accumulation control is leading individual insurers to further reduce capacities and increase prices. Instead, the insurance industry must work together with the wider economy. Only then can we achieve a successful digital and environmental transition that secures long-term peace, stability and prosperity in Europe.
I hope you enjoy reading our market forecast.


Hartmuth Kremer-Jensen

Chief Broking Officer D-A-CH | Deputy CEO Germany