Property Insurance

No recovery for property insurance expected

While the transition to a soft market phase is lacking sustainable positive results, there will be no lack of surprises in the 2022 industrial property insurance market. Insurers’ convergence in risk assessment and risk selection is being accompanied by unprecedented divergence in pricing. A changing risk landscape is giving rise to diversity and complexity of coverage-related issues that will – and must – play a weighty part in policy renewal, alongside the question of the development of rates and capacities.

Market situation

The third year of restructuring by insurers has ended in Germany with a combined ratio of 177 per cent in the market, the highest figure so far in this millennium (see chart 1). The reasons are manifold: in addition to major fire damage, it is mainly the flash flooding caused by storm Bernd which accounted for up to half of all claims expenditure for some insurers.

The hitherto costliest natural hazard event in Germany has left its mark on the insurance and reinsurance markets (see chart 2). In light of the extraordinary magnitude and intensity of losses, insurers are now focussing on recurrence intervals and what impact such cumulative events could have in future. The assessment of such exposure will also determine to what extent and in what form insurers will be formulating their pricing and underwriting concepts in 2022 and beyond.

The increase in claims expenditure caused by natural hazards associated with climate change is also becoming evident globally. Over the past five years, the threshold of USD100bn has been exceeded four times worldwide (see chart 3). In the ten years before that, this happened just once. What is striking are the “secondary natural hazards” such as drought, forest fires and flooding which currently make up the lion’s share. This trend is expected to continue in the future.

Combined ratio in property insurance

from 2005 to 2022

* Projection

Source: GDV sector statistics for direct business in Germany, rounded premiums and ratios


Anyone hoping that a transparent and uniform property insurance market will bring about recovery in negotiations with insurers is bound to be disappointed (for now). For the time being, no such development is expected to occur. With the transition to a soft market phase lacking sustainable positive results, strict risk assessment and risk selection will continue to prevail. While some insurers are significantly reducing their demand for additional premiums from customers with no claims history and, in some cases, are willing to continue their policies unchanged if the claims and risk situation is positive, other insurers look set to continue their restructuring, something which will hit the middle market segment in particular even harder than before. Premium forecasts will be influenced even more heavily than before by the segment in question and the specific insurers in the syndicate, and will also be determined by rising insurance amounts caused by inflation. Whether there is any premium level which would have consequences for the fate of a given policy will depend on the actions of new, emerging competitors.

Future developments remain exciting, especially where customers have worked consistently to improve their risk and are thus able to exploit the price divergence in the market to their advantage.

For insurers, portfolio protection will once again take on greater importance in terms of restructuring – prices are becoming less volatile and implementation pressure is waning. Nevertheless, the industrial property insurance market remains highly sensitive to losses and earnings.

In view of the insurance market environment and insurers’ underwriting behaviour, customers will still be looking for alternative risk-financing elements in the future. On this point, the courage to embrace change may aid liberation from the market cycle.