MARKET FORECAST 2020 The German Insurance Market
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MARKET FORECAST 2020
The German Insurance MarketALL THIS IS SET TO HAPPEN
IN 2020:
From ongoing restructuring in the property sector and a hardening of the market in marine cargo
WHAT’S insurance through to tighter regulations to which board members and executives need to adjust:
here are our predictions for lines that are set to see significant developments.
THE DAMAGE? Property Insurance Marine Cargo Insurance
The general expectation is that insurers will The anticipated trend reversal appeared with a
Always learn from experience. This old adage has also been the watchword of the insurance continue their restructuring. It is true that the rise in vengeance in the last four months of 2019. Marine
industry for decades. Insurers have always sought to assess premiums and risks on the basis of premiums, combined with reduced loss expenses, generally cargo insurers are now responding to the negative figures that
claims experience. In future, however, they will have to rethink this approach. Digitisation and meant an improved income position for insurers last year. have been accumulating on their books for many years, by
technological advances under the banner of “Industry 4.0” involve unknown risks and new However, the question of whether and to what extent individual requesting, on average, higher premiums. Further
challenges which cannot be deduced from past claims. This means insurers will need to keep one insurers will continue to initiate such restructuring measures will consequences include the adjustment of terms and conditions
step ahead of claims. depend, in particular, on whether they have achieved their and loss exclusions, together with correspondingly restricted
restructuring goals or whether the measures in question have coverage. The list of risks that are no longer underwritten by
Our market forecast looks at some of these trends. The cyber sector is particularly interesting. helped improve the insurer‘s result. insurers is growing. An ever smaller number of insurers are
That’s because it is often difficult to predict just how far the consequences of cyber attacks will willing to offer coverage for marine cargo with a high storage
spread. From total operational failure to often undetected “phishing” of customer data, there are Restructuring measures will differ, depending on the line and risk share. As a result, when it comes to property risks in need of
various loss scenarios that give rise to complex liability issues. Issues of liability and coverage also type of risk. Various scenarios can be expected, ranging from restructuring, it is often no longer possible to shift these over to
play an important role in the area of autonomous mobility. In addition to the legal component, rising premiums and higher deductibles to more stringent safety marine cargo insurance. Marine cargo insurers are also
there is a need for multiline insurance concepts that keep pace with the technical development of requirements. Restricted underwriting capacities are still to be increasingly demanding risk information such as warehouse
driver-assist systems. expected for highly critical operations, especially where the inspection reports, insisting on risk-adequate premiums or
desired safety standard has not yet been attained. In such cases, generally refusing to cover such risks.
It remains to be seen whether the insurance industry really will be facing “the most important not only are international markets or reinsurance solutions seen
change in the history of the entire sector” as Carsten Maschmeyer, investor and panel member of are possible options, but there will also be increasing forms of While the number of insurers is falling and the general
the German version of “Shark Tank” recently indicated in an interview. But one thing is for sure: assuming own risks. In particular major losses recently suffered willingness to underwrite is in decline, the appetite for risk
2020 is set to bring exciting developments in many areas, with the insurance industry and risk by waste management companies have prompted more market among individual insurers (i.e. the underwriting capacity
management acting as important players on the way. players to withdraw from this line. being offered) is also on the wane. Insurers are withdrawing
from participations in full or part, or are offering participation
Even if individual insurers, owing to their favourable earnings at conditions less favourable than those provided by the lead
position, were again more willing to underwrite property risks, insurer. There are fewer potential lead insurers available for
the current market situation is unlikely to improve overall. A international insurance programmes.
major boost could only come about if additional large capacities
Hartmuth Kremer-Jensen were to become available in the German market.
Deputy CEO | Chief Broking Officer
Engineering Lines
Premium increases across the board are not expected in
D&O Insurance the engineering lines. Nevertheless, rising premiums are
This year is likely to see the ongoing hardening of the D&O still highly likely in the contractors‘ all risks insurance line. In
market as a result of higher premiums, lower capacities and addition, insurers are set to increase rates and deductibles or
CONTENTS tighter terms and conditions. This trend is coinciding with tighten conditions even more consistently for policies with a
the tightening of D&O liability, for example, through the possible high loss ratio. The placement of high risks such as tunnels,
® Attacks by cyber criminals are introduction of corporate liability legislation involving fines of up offshore plants or gas turbines remains a challenge. Moreover,
targeted , with SMEs at risk to 10% of annual sales, the imposition of fines under the new the environmental discussion is having an influence on the
General Data Protection Regulation and the introduction of an EU insurers‘ underwriting behaviour in the case of coal-fired power
® Batteries increase the risk of fire class action with compensation components. Further liability- plants.
hazard. Liability risks should not relevant developments are to be expected in the context of the
be overlooked Cum-Ex scandal, US risks, cyber incidents, insolvencies and the
consequences of Brexit.
® (Semi) autonomous driving is
bringing about changes in cover
® Demography is forcing mana-
gers to rethink their strategiesATTACKS BY CYBER CRIMINALS
ARE TARGETED , WITH SMES AT
RISK
Cyber risks have penetrated the heart of society. Not only do corporations have to protect
BATTERIES INCREASE THE RISK
themselves against online attacks , but so, too, do an increasing number of public institutions.
Prevention is becoming ever more important - as is a precise analysis of one’s own risks. OF FIRE HAZARD. LIABILITY RISKS
Three examples from recent months illustrate the increasing indiscriminately. By encrypting data, they have often been
SHOULD NOT BE OVERLOOKED
threat to public institutions: The Berlin Court of Appeal had successful in extorting payments from their victims. Today,
to pull the „digital plug“ after being infected with „Emotet“ cyber criminals focus on targeted attacks. Ransom demands are We’ve never been more mobile than we are today. The pace of mobility being driven by digiti-
malware. Justus Liebig University in Giessen also remained increasing, placing corporations and financially robust SMEs in sation. The required energy is provided by lithium-ion batteries. Any time, any place. With such
offline for weeks. In the US metropolis of New Orleans, particular in hackers’ sights. batteries becoming more widespread, fire and explosion hazards are increasing. These Emerging
meanwhile, the city’s administration was forced to declare a
digital state of emergency.
Risks concern not just battery manufacturers.
Increased interest
Cyber criminals take a more targeted approach. Until now, in liability covers
they have often attacked companies with ransomware Digitisation creates new freedoms. Wherever we are, we do on- These energy storage devices ensure that we have access to elect-
line banking using our tablets and communicate by smartphone. ricity, any time, any place. Thanks to their high energy density,
Until now, companies have been driven by fears that they would In both our professional and private lives, robots make our daily they can also be used in powerful tools across a wide range of
have no crisis management in place in the event of an attack and routines easier. E-cars and e-scooters allow us to reach our des- applications. All of which means a major increase in the demand
that their entire business would be paralysed. In future, however, tination without causing harmful emissions. If mobility limits are for batteries - and, with it, in fire and explosion risks.
there will also be increased interest in liability components of to fall, one thing is particularly important: the use of lithium-ion
cyber insurance. Should personal data be stolen during a cyber batteries. Lithium-ion batteries can get extremely hot. Once they ignite and
attack and made publicly accessible on the Internet, those catch fire, they are difficult to extinguish. For some years now,
affected may be able to claim damages against the company batteries have been involved in a growing number of building
that’s been attacked. The damage potential could increase further Building fires involving lithium-ion batteries have fires. Recent loss incidents have revealed the extent of the risk:
as consumers can now also sue for damages in Germany by increased significantly since 2015. In two Bavarian recycling yards, batteries ignited and triggered
means of a model declaratory action. Even small payments can a fire. A defective e-bike battery set fire to a new hangar on the
add up to vast claim amounts if tens of thousands of claimants are industrial estate in the north German town of Geesthacht.
involved.
Fire incidents such as this have the potential not only to cause
Where do a company’s cyber risks lie? How would a „successful“ severe property damage but also personal injury and pecuniary
attack affect the ability to do business? Many SMEs still don’t loss. Liability risks don’t just concern the battery manufacturers.
know the answers to such central questions, meaning that Companies that install batteries in products or launch products
digital gateways remain undetected. One reason is that the containing batteries should also be aware of the increased liability
LI-ION
responsibility for this security issue - no matter in which area - is risks.
not considered a core task.
Anzahl der Brände
Number of fires
However, experience in practice clearly shows that if these Reduce fire hazards
requirements are made a matter for the boss, the implementation through risk management
of a cyber defence strategy is given the necessary priority
and momentum within the company. Even the use of risk
management tools can provide an initial comprehensive idea of a What can companies do to counteract these risks? As a preven-
company’s operational risk position. Once the security flaws have tive measure, it is advisable to analyse operating areas where
been identified, cyber defence can gradually be improved. And batteries are used to identify increased fire risks and to learn
not only that: the company also has significantly better cards to how to handle batteries properly. Second, any insurance cover
play with insurers when it comes to covering residual cyber risks. should be checked. Insufficient insurance sums frequently do
not provide adequate cover in the event of a loss.
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
Source:
Database of the German Institute for Damage Prevention and Research (IFS) Quelle: IFS-SchadendatenbanDEMOGRAPHY IS FORCING
MANAGERS TO RETHINK THEIR
STRATEGIES
(SEMI) AUTONOMOUS DRIVING Demographic trends are turning the labour market upside down in many areas. To attract and
retain professionals, employers have to be convincing. Whether they succeed won’t depend
IS BRINGING ABOUT CHANGES on salaries and bonuses alone.
IN COVER The low birth cohorts are having an increasingly strong impact.
At the same time, more and more people from the “baby
the effectiveness of such initiatives by offering a range of
communication solutions: examples include Total Rewards
boomer” generation are retiring. These two factors mean that Statements via apps, Internet platforms or traditional media.
the labour force potential is barely rising and might even decline They provide individual employees with a personal overview of
Although the trend towards autonomous vehicles is boosting safety, it also presents insurers with in the future. In many skilled trades as well as in the IT and care how occupational benefits pay off - and help boost employee
new liability scenarios. Companies need specific cover solutions to insure their risks relating to the sectors, an oversupply of jobs is already being met by a shortfall loyalty to their company in the longer term.
supply of products such as firmware and software, among other things, for motor vehicles. Against in candidates. This is why companies need to start rethinking
their approach: in actual fact, they are approaching employees
this backdrop, both liability and coverage law interfaces threaten to push up the costs of cover in order to fill their vacancies. Current HR challenges
provided by general liability insurance (product liability and recall costs).
Attracting
HR departments’ tasks therefore include establishing long-term and retaining talent 67 %
staff loyalty, actively managing staff turnover, keeping staff fit
Improving employee
For about 20 years, driver assist systems have increasingly been parts, including in connection with vehicle recalls. This is for work as long as possible and boosting social competence. engagement and morale
45 %
taking over the driver‘s tasks. No one yet knows for sure when we precisely where the coverage landscape is changing. Studies reveal that only five per cent of employees prefer
Increasing productivity
will be taken to our destination by fully autonomous cars. This is a purely monetary incentive system. Most would prefer and employee performance
36 %
also because one key question remains unanswered: who would In the past, instances of vehicle failure would result in the repair occupational social benefits granted by the employer, from
Handling
be liable in the event of traffic accidents caused by technical failure? or replacement of defective or faulty parts. The increased use of company pensions and tailored training to company cars, ageing of employees
33 %
driver assist systems means that defects can only be eliminated corporate bike schemes, company health insurance and
When it comes to the coverage of damage potential, the by updating or renewing software. This creates new liability occupational disability insurance. Quelle: AON EMEA Health Survey 2018
continued digitisation of motor vehicles should in future lead to scenarios. As a result, the insurance industry needs to find Organisational health and wellness issues today and
a gradual shift from motor insurance to general liability insurance. innovative solutions – as has been the case with the IT-related in the future
Since the mid-1970s, liability insurance cover has been extended Tech E&O (Errors and Omissions liability), for example. Employers offering health benefits Germany Western Europe
to include individual components for pure financial losses. These are winning Financial
health
48 % 52 %
mainly concerned dismantling and assembly costs for defective
Insurers are limiting capacities while Stress and
mental 85 % 65 %
Driver assist systems are gradually taking control. demanding greater transparency Since the beginning of 2020, company health insurance has health issues
once again been enjoying a favourable tax framework, a fact
which should give it a healthy boost. Employers and employee Ageing 48 % 37 %
Urban driving*
In parallel with this, for the first time in nearly 20 years, the
insurance industry is being forced to adjust the premium level representatives have been focusing on occupational health
Unhealthy
Valet parking* (driverless parking) for certain risks covered by industrial liability insurance, leading management for years. Employees enjoy a range of benefits, employee 68 % 52 %
to a hardening of the market. On the one hand, customers‘ from regular health checks and preventive medical check-ups lifestyles
Fully automated needs for coverage is rising markedly. On the other hand, to better inpatient treatment and the provision of medication. Employees’
88 % 57 %
however, a lack of empirical data means that, in some cases, Likewise, companies benefit from positive effects such as shorter physical
health
insurers are still finding it difficult to fully assess loss potentials in convalescence periods and lower costs related to sick leave.
Motorway driving* order to be able to adequately calculate premiums for the
Source: 2018 EMEA Health Survey, Aon
required scope and amount of cover. As a result, the scope and
Driving in traffic jams / tailbacks* In Europe in particular, there is a trend towards cross-border
capacities of risk coverage are, in some cases, being limited,
harmonisation with regard to the coverage of biometric risks,
Highly automated while the need for risk data continues to increase.
within the framework of freedom of service possibilities. While
Anglo-American companies tend to lead the way when it comes
Key parking
Irrespective of this, there is no sign of any future harmonisation to providing cover for occupational disability, French companies
Motorway driving assistant of liability cover. Quite the contrary. Along with general liability are more likely to be out in front in the provision of cover in the
insurance, Tech E&O is gaining in importance while cyber event of death.
Parking assist Semi-automated insurance has already become established. Companies will,
therefore, increasingly be required to operate in several lines at Another crucial factor is how employers communicate
2015 2020 2025 2030 once. This approach is not without its risks, since there will be occupational benefits to their staff. Most employees
Expected introduction
duplications and gaps at the interfaces of cover, possibly leading do not know about all the programmes and
Driving functions *Assumes framework legislation in place to high costs for companies in the event of losses. To avoid both is fringe benefits granted by their company.
Parking functions Source: VDA one of our key tasks on our journey towards autonomous driving. That’s why AON helps companies increase
.OUR EXPERTS
JOHANNES BEHRENDS
johannes.behrends@aon.de
Cyber Insurance
MARCEL ROEDER
marcel.roeder@aon.de
D&O Insurance
DANIEL HEIMSOTH
daniel.heimsoth@aon.de
Health Solutions
LUTZ FÜNGERLINGS
lutz.fuengerlings@aon.de
Liability Insurance
THOMAS GAHR
thomas.gahr@aon.de
Liability Insurance
INA STRAUB
ina.straub@aon.de
Property Insurance
MICHAEL WOLTER
michael.wolter@aon.de
Engineering Lines
MARKUS NELSEN
markus.nelsen@aon.de
Marine Cargo Insurance
ABOUT AON
Aon is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our
work is based on a comprehensive understanding of risk, opportunity and potential. We aim to offer you bespoke solutions
based on in-depth analysis, enabling you to realise your goals. We have 50,000 employees dedicated to achieving this aim
in 120 countries, 1,500 of them based at twelve locations in Germany.
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