AM Best’s Insurance Market Briefing - Germany · Kaliforniens (Gesamtschaden $16,5 Mrd., versichert $12,5 Mrd.), und Hurrikan Michael (Gesamtschaden $16 Mrd., versichert $10 Mrd.)

AM Best’s Insurance Market Briefing -Germany

Steigenberger Hotel Metropolitan

Frankfurt

April 10, 2019

2

Welcome

and

Introductory Comments

Nick Charteris-Black

Managing Director, Market

Development & Information

Services

A.M. Best – EMEA

William Mills

Director, Market

Development

A.M. Best - EMEA

Preparing for Brexit

3

Preparing for Brexit... AM Best

4

• AM Best Rating Services B.V. (AMB-EU) based in Amsterdam

was registered with ESMA on 3 December 2018

• Office is now fully staffed and operational

• EU27 clients migrated from London via a contractual novation

process and analytical handover as required

• London will remain as the EMEA hub office, providing certain

non analytical services to the Amsterdam office

• Common board membership and senior management working

across both offices to ensure consistency and continuity

• Most rated UK insurers underwriting EEA business have

established new EU subsidiaries

• Variety of selected locations but Luxembourg and Dublin have been

particularly popular, whilst Lloyd’s selected Brussels

• Most rated UK insurers have also completed or initiated a transfer

of their EEA business to an affiliated EEA insurer under a “Part VII”

transfer to service existing contracts

5

Preparing for Brexit... UK Rated Insurers

Agenda

6

14:10 Guest Presentation: Natural

Catastrophes and Climate

Change - Infrastructure -

Insurance: National and

International Developments

Ernst Rauch

Global Head, Climate & Business

Development. Chief Climate and Geo

Scientist, Munich Re

14:50 Thematic Session: Reinsurance

Industry Update

Dr Mathilde Jakobsen

Director, Analytics

15:20

15:40 Thematic Session:

Market Segment Outlooks

Charlotte Vigier

Senior Financial Analyst

Konstantin Langowski

Financial Analyst

16:15 Thematic Session: How Critical is

Innovation for Future Success

Within the Insurance Industry?

Dr Angela Yeo

Senior Director, Analytics

17:00

Disclaimer

7

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insurance policies, contracts or any other financial obligations, nor does it address the suitability of any particular financial

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Please note that due to regulatory restrictions Market Development employees are unable to have any role in the

determination of credit ratings or the development or modification of rating procedures or methodologies. Consequently

they are unable to discuss any matters relating to the analytical process as applied to your firm or to provide any feedback

on your behalf in respect of the rating procedures or methodologies.

Naturkatastrophen und Klimawandel – Infrastruktur –

Versicherung: nationale und internationale Entwicklungen

A.M. Best – Frankfurt, 10 April 2019

Ernst Rauch

Chief Climate and Geo Scientist

UR

Sfo

to_pix

elio

.de

Naturkatastrophen –

Beobachtungen und Trends

URSfoto_pixelio.de

Naturkatastrophen weltweit: Rückblick 2017Teuerstes Naturkatastrohenjahr für die Versicherungswirtschaft

10

Rekord-Niederschlagsmengen während

Hurrikan Harvey:

>1000l/m² Regen entlang der Ostküste Texas,

statistisch einmal in 1000 Jahren

Rekord-Windgeschwindigkeiten während

Hurrikan Irma:

stärkster Sturm außerhalb der Karibik und des

Golf von Mexiko mit Windgeschwindigkeiten

Hurrikan-Kat5 (>250/300 km/h)

93% der Naturkatastrophenschäden im Jahr

2017 verursacht durch Wetter-Ereignisse:

$330 Mrd. ökonomische Schäden, davon $135

Mrd. versichert.

340 Mrd. 138 Mrd.

220 Mrd.

Quelle: Munich Re, NatCatSERVICE, 2018

Naturkatastrophen weltweit: Rückblick 2018Schäden getrieben durch starke Hurrikane, Buschfeuer und Dürren

11

Quelle: Munich Re, NatCatSERVICE, 2019

Ein schadenträchtiges zweites Halbjahr führt zu

$160 Mrd. Gesamtschäden aus

Naturkatastrophen, annähernd die Hälfte der

Schäden des Vorjahres jedoch über dem

Langzeitdurchschnitt ($140 Mrd.).

Der Anteil versicherter Schäden lag bei 50%.

Das “Camp Fire”, ein Waldbrand im Norden

Kaliforniens (Gesamtschaden $16,5 Mrd.,

versichert $12,5 Mrd.), und Hurrikan Michael

(Gesamtschaden $16 Mrd., versichert $10 Mrd.)

zählen zu den teuersten Ereignissen.

In Europa führte die langanhaltende Dürre mit

hohen Schäden in der Landwirtschaft und vielen

Waldbränden zu Schäden von $3,9 Mrd., wovon

nur ein kleiner Teil versichert war.

NatCatSERVICE

Naturgefahren Schadenereignisse weltweit 1980–2018Gesamtschäden und versicherte Schäden

US$ Mrd.

Gesamtschäden

(in 2018 Werten)

Versicherte Schäden

(in 2018 Werten) Inflationsbereinigt mittels landes- bezogenem Verbraucherpreisindex

unter Berücksichtigung von Wechselkurs-änderungen gegenüber dem US$.

© 2019 Münchener Rückversicherungs-Gesellschaft, NatCatSERVICE – As at January 2019 12

NatCatSERVICE

Naturgefahren Schadenereignisse Deutschland 1980–2018Gesamtschäden und versicherte Schäden

EUR Mrd.


Gesamtschäden

(in 2018 Werten)

Versicherte Schäden

(in 2018 Werten) Inflationsbereinigt mittels landes- bezogenem Verbraucherpreisindex

unter Berücksichtigung von Wechselkurs-änderungen gegenüber dem US$.

Naturgefahren Schadenereignisse in Deutschland 1980 – 201810 teuerste Ereignisse für die Gesamtwirtschaft

Date Event Affected area

Overall losses

in EUR m

original values

Insured losses

in EUR m

original values Fatalities

11-20.8.2002Floods,

flash floods

Saxony, Dresden, Grimma, Torgau, Zwickau,

Saxony-Anhalt, Magdeburg, Bitterfeld11,600 1,800 21

30.5-12.6.2013 FloodsBavaria, Passau, Deggendorf, Würzburg,

Rosenheim, Baden-Württemberg, Saxony8,000 1,700 8

18-19.1.2007Winter Storm

KyrillEntire country 4,200 2,400 13

27-28.7.2013Hailstorms,

severe storms

Baden-Württemberg, Reutlingen, Pforzheim,

Lower Saxony, Wolfsburg, Hannover3,600 2,800

31.5.-9.6.2016Flash flood,

severe storm

Baden-Württemberg, Schwäbisch Gmünd,

Bavaria, Altbach, Julbach, Simbach am Inn 1,800 750 7

26.12.1999Winter Storm

Lothar

Baden-Württemberg, Stuttgart, Reutlingen,

Baden-Baden, Karlsruhe, Pforzheim1,600 900 15

18.1.2018Winter Storm

FriederikeEntire country 1,500 1,200 8

June -

August 2003

Heat wave,

droughtEntire country 1,500 10 9,000

12.7.1984 HailstormBavaria, esp. Munich, Passau, Landsberg,

Altomünster, Freising, Ansbach1,500 750

26-28.10.2002Winter Storm

Jeanett

North Rhine-Westphalia, Rhineland-Palatinate,

Hamburg, Hesse, Schleswig-Holstein1,200 820 11

Source: Munich Re, NatCatSERVICE, 2019


Versicherungslücke nach Naturkatastrophen-

ereignissen (global) nach Einkommensgruppen

15

Versicherungslücke in Ländern mit hohem

Einkommen

Die Versicherungslücke (nicht-versicherte Schäden anteilig an Gesamtschäden) schließt

sich seit 1980 beständig in Ländern mit höheren Einkommen (< 60%), wohingegen sie in

Niedriglohnländern konstant groß bleibt (>95%)

© Munich Re (2018)

*Einkommensklassifizierung definiert nach Weltbank: “hohe Einkommen”: GNI ≥ 12,736 US$; „niedrige Einkommen“: GNI ≤ 1,045 US$

40%

50%

60%

70%

80%

90%

100%

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

40%

50%

60%

70%

80%

90%

100%

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

Versicherungslücke in Ländern mit niedrigem

Einkommen

Aber: noch immer 59% ohne

Elementargefahrenversicherung in Deutschland

16

Deckungsumfang Elementarschadenversicherung:

Starkregen, Überschwemmung, Rückstau,

Hochwasser, Schneedruck, Lawinen/Erdrutsch,

Erdsenkung, Erdbeben, Vulkanausbruch

Im Durchschnitt sind rund 41% der Gebäude in

Deutschland umfassend gegen Elementargefahren

versichert

Spitzenreiter der Elementarversicherung ist Baden-

Württemberg mit einer Abdeckung von 94%; in

Bremen sind es gerade einmal 19%

Viele Eigentümer unterschätzen die Gefahr vor

Starkregen ( Sturzfluten) oder sie schätzen den

Umfang ihrer Wohngebäudeversicherung falsch ein.

Quelle: GDV, Munich Re

Naturkatastrophen und

Infrastruktur

Source: Stoonn / shutterstock.com

Flut Thailand 2011Ausfall von 25% der globalen HDD-Festplattenproduktion

18

Ca. 1,000,000 Arbeitsplätze national

und international betroffen

9 Automobilfabriken (überwiegend in

Japan) mussten Produktion stoppen

- 20% Rückgang in der

Automobilproduktion in Thailand in

2011 (gegenüber Vorjahreszeitraum)

Quelle: TOPICS GEO Naturkatastrophen 2011, Munich Re 2011; *UNISDR

Hurrikan Sandy 2012, New York Hohe Infrastrukturschäden durch Sturmflut

Rekord-Sturmfluten von 3,5 Meter bis stellenweise 4,5 Meter.

Großflächige Unterbrechung der Stromversorgung über Teilen von 15 Bundesstaaten.

An manchen Orten konnten die Ausfälle erst nach mehreren Wochen behoben werden.

Fünf U-Bahn Stationen, sieben Eisenbahntunnel unterhalb des East River liefen voll; das

New Yorker U-Bahnnetzt stand drei Tage still.

90 Hektar Gewerbefläche im Finanzdistrikt vorübergehend geschlossen.

Start- und Landebahnen an den Flughäfen JFK und LaGuardia waren mehrere Tage

überschwemmt.

Quelle: Topics GEO, Natural Catastrophes 2012 19

Sturmfluten in HamburgSchadenreduzierung durch Deicherhöhungen

20

Katastrophenflut Hamburg-

Finkenwerder 1962: >300 Tote

Quelle: Munich Re; Stadt Hamburg

Überschwemmungen Mitteleuropa 2002 Historische Ausmaße in zahlreichen Ländern Mitteleuropas

21

Überflutung des Dresdener Hauptbahnhofs

August 2002

Quelle: TOPICS GEO Naturkatastrophen 2003

Dresden, 12. August: innerhalb von 24

Stunden 158 mm Regen – mehr als

doppelt so viel, wie jemals zuvor

Infrastrukturschäden durch Naturkatastrophen in

Deutschland (weitere Beispiele)

Quelle: Munich Re, NatCatSERVICE, 03/2019

Dürre Europa Mai – Nov. 2018:

Niedrigwasser legt

Schiffsverkehr in Deutschland

lahm

Landwirt. Nutzflächen

beschädigt

Gesamtschaden: 1 Mrd. EUR

Wintersturm Jeanett Okt. 2002:

Böen bis zu 180km/h

Schäden an Windparks

Stromleitungen abgerissen

Gesamtschaden: 1,2 Mrd. EUR

Versichert: 820 Mio. EUR

Hochwasser Juni 2013:

Beschädigung von Straßen,

Schienen

Gesamtschaden: 10,4 Mrd.

EUR

Versichert: 2,2 Mrd. EUR

22

Versicherungstechnische

Lösungsansätze

Source: Stoonn / shutterstock.com

Klimawandel bezogenen Aktivitäten von Munich Re

24

Erfassung und Bewertung der

Auswirkungen des Klima-

wandels auf Frequenz und

Intensität von Naturgefahren

Unterstützung des Ausbaus

erneuerbarer Energien und

Infrastrukturprojekten durch

unsere nachhaltige

Investment-strategie

RISIKOBEWERTUNG ASSET MANAGEMENT

Klimaneutralitätsstrategie von Munich Re

München: seit 2009, Rückversicherung weltweit: seit 2012, Munich Re (Gruppe): seit 2015

RISIKO-

TRANSFERLÖSUNGEN

Anbieter von Risikotransfer-

lösungen für neue Technologien

und PPP-Lösungen für

Regionen welche besonders

durch die Folgen des

Klimawandel betroffen sind

Quelle: Munich Re (2018)

Neue Kohle-Leitlinien

Rückzug aus der Versicherung neuer Kohle-Kraftwerke / -Mienen; keine Investition in Kohleintensive

Aktien / Anleihen

TCFD (Task Force on Climate-related Financial Disclosures)

Teilnahme an einer UNEP PSI Arbeitsgruppe zur Ausarbeitung von Industriestandards zur Offenlegung

Munich Re Deckungskonzepte für erneuerbare

Energien und neue Technologien

25

Munich Re bietet Versicherungslösungen entlang der gesamten Wertschöpfungskette

erneuerbarer Energien / neuer Technologien. Einige Beispiele:

Photovoltaik

Leistungsgarantie für

Photovoltaik-Hersteller

Optionale Deckung für

Betreiber

Projektdeckung für

Investoren

CSP

Leistungsgarantie für

Hersteller von solar-

therm. Kraftwerken

Versicherung für

Solaranlagenbetreiber

(Verzug, Leistung)

Geothermie

Absicherung des

Bohrerfolgs bzw.

Fündigkeitsrisikos

Wind

Serienschadendeckung für

Hersteller und Zulieferer

Offshore-Logistik-Cover

für Verzögerungen

Wartungskosten-

überschreitung

Sonne/Wind/Wasser

Deckungen bei zu geringer Leistung im Kraftwerksbetrieb

durch ungenügende mittlere Sonneneinstrahlung sowie

Schwankungen im Wind- und Wasserangebot

Quelle: Munich Re, 2018

Munich Re ermöglicht als erster Versicherer weltweit langfristige Leistungsgarantien bei

Batterien von Herstellern gegenüber ihren Kunden.

Gedeckt sind Kosten für Reparatur- sowie Austausch von Batteriemodulen, die ein

bestimmtes Kostenniveau übersteigen.

Hauptanwendungsbereiche der neuen Deckung sind zunächst Großprojekte zur

Netzstabilisierung und zum Lastspitzenausgleich.

Munich Re positioniert sich als weltweit führender Entwickler neuer

Versicherungslösungen für klimafreundliche Technologien.

Risikotransferlösungen von Munich Re für

Batterieleistung

26Quelle: Munich Re / Corporate Insurance Partner (2019); Bildquelle: ESSINC.com

© 2019 Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München

("Munich Re").

All rights reserved.

The content of this presentation (including, without limitation, text, pictures, graphics, as well

as the arrangement thereof) is protected under copyright law and other protective legislation.

These materials or any portions thereof may be used solely for personal and non-commercial

purposes. Any other use requires Munich Re’s prior written approval.

Munich Re has used its discretion, best judgement and every reasonable effort in compiling

the information and components contained in this presentation. It may not be held liable,

however, for the completeness, correctness, topicality and technical accuracy of any

information contained herein. Munich Re assumes no liability with regard to updating the

information or other content provided in this presentation or to adapting this to conform with

future events or developments.

Disclaimer

Vielen Dank für Ihr Interesse!

Ernst Rauch

Website: www.munichre.com

Kontakt: [email protected]

Quelle: Stoonn / shutterstock.comUR

Sfo

to_pix

elio

.de

http://www.munichre.com/

mailto:[email protected]

29

Thematic Session:

Reinsurance

Industry Update Dr. Mathilde

Jakobsen

Director, Analytics

Discussion Outline

Global Reinsurance Market Capacity

Global Reinsurance Results and Trends

Global Reinsurance 2019 Renewals

Global Reinsurance Sector Outlook

30

Global Reinsurance Market Capital

Estimate for Total Dedicated Reinsurance Capital (USD billions)

Sources: Estimates by Guy Carpenter and AM Best

31

320 340 332 345 345 345

48 60 68 75 87 95

2013 2014 2015 2016 2017 2018E

TraditionalCapacity

Lost /

Trapped


Top 10 Global Reinsurance Groups –

Non-Life

Top 10 Global Reinsurance Groups –

Life

Munich Reinsurance Company

Swiss Re Ltd.

Berkshire Hathaway Inc.

Lloyd’s

Hannover Ruck SE

SCOR S.E.

Everest Re Group Ltd.

XL Group plc

Transatlantic Holdings, Inc.

PartnerRe Ltd.

Munich Reinsurance Company

Swiss Re Ltd.

Reinsurance Group of America Inc.

SCOR S.E.

Hannover Ruck SE

Great West Lifeco

Berkshire Hathaway Inc.

Pacific LifeCorp

PartnerRe Ltd.

Assicurazioni Generali SpA

32

Source: AM Best data and research. Ranked by unaffliated gross

premium written in 2017


33

ILS Fund Managers' Assets January 2019 (USD millions)

Assets* Funds Location ILS Fund Managers Acquisitions

Nephila Capital 12,300 Bermuda Purchased by Markel 2018

Credit Suisse Insurance Linked Strategies Ltd. 9,000 Zurich, Switzerland

RenaissanceRe Holdings Ltd.* 8,200 Bermuda

LGT ILS Partners Ltd. 7,900 Pfaeffikon, Switzerland

Stone Ridge Asset Management 6,980 New York

Markel CATCo Investment Management 6,800 Bermuda Purchased by Markel 2015

Securis Investment Partners LLP 6,700 London, England Northill bought out Swiss Re in 2012

Fermat Capital Management, LLC 6,200 Westport, CT

Leadenhall Capital Partners LLP 5,200 London, England Purchased by MS Amlin 2014**

Twelve Capital AG 4,500 Zurich, Switzerland

Aeolus Capital Management Ltd 4,000 Hamilton, Bermuda Purchased by Elliott in 2016

Elementum Advisors, LLC 4,000 Chicago, IL

AlphaCat Managers 3,500 Bermuda Purchased by AIG in 2018

Schroder Investment Management 3,040 London, England

Amundi Pioneer 2,300 Boston, MA

Top 15 Fund Managers 90,620

* Renaissance Re includes Top Layer, DaVinci, Langhorn, Vermeer and Medici. ** MS&AD purchased the stake in Leadenhall from its

subsidiary, MS Amlin, in 2019.

Source: Artemis and AM Best data and research

Global Reinsurance Market Trends

Source: AM Best data and research

34

13.0%

11.6%

9.5%8.3%

-0.3%

7.0%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

2013 2014 2015 2016 2017 1H 2018Return on EquityFive-Year Average

Return on Equity

87.9% 89.7% 90.4%95.2%

110.1%

94.5% 94.7%

0%

20%

40%

60%

80%

100%

120%

2013 2014 2015 2016 2017 1H2018

5yrAvg

Combined Ratio

Total Economic and Insured Losses (USD billions)

35

Source: Swiss Re Institute

2018 2017Annual

Change (%)

10-Year

Average

% of 10-Year

Average Economic

Losses

Economic Losses

Natural Catastrophe 146 342 -57% 208

Man-made 9 8 9% 12

Total 155 350 -56% 220

Insured Losses

Natural Catastrophe 71 143 -50% 63 30%

Man-made 8 7 20% 8 67%

Total 79 150 -47% 71 32%

86.8% 88.1% 90.0%97.9%

114.0%

95.0%

2013 2014 2015 2016 2017 2018Q2

Combined Ratio by Reinsurance Sector

36

European “Big Four” U.S. & Bermuda Lloyd’s

86.6% 87.4%90.7%

92.5%

109.0%

92.9%

2013 2014 2015 2016 2017 2018Q2

Loss Ratio

89.3%92.4% 91.8%

96.3%

109.0%

95.0%

0%

20%

40%

60%

80%

100%

120%

2013 2014 2015 2016 2017 2018Q2

Return on Equity by Reinsurance Sector

European “Big Four” U.S. & Bermuda Lloyd’s

Five-Year Average


2017

37

13.1%

11.0%11.5%

9.7%

2.7%

9.3%

2013 2014 2015 2016 2017 2018Q2

11.4%10.9%

7.5%6.8%

-0.5%

6.0%

2013 2014 2015 2016 2017 2018Q2

16.2%14.7%

8.9%8.1%

-7.3%

4.3%

2013 2014 2015 2016 2017 2018Q2

2017

Possible turn in trajectory

More than USD 200bn in

natural catastrophe

losses in 2017 and 2018

Earnings under

pressure

Increased demand for reinsurance

Capacity crunch in

retrocession markets

Capital elasticity has flattened the reinsurance market cycle

38

What Has Transpired

Overall RenewalPricing was flat

January RenewalNegotiations ran late

39

What to Expect?

ILS Funds and collateralised re expect larger rate response for the 4/1 & 6/1 renewals with April renewals indicating +10% and potentially higher for Florida and other US loss-affected regions

Capital markets continue to be the key to sustained rate increases at the mid-year renewals

An abundance of capital waiting on the sideline

Evolving interest rate environment is a new variable in the pricing equation

40

AM Best’s Market Segment Outlook –

Global Reinsurance

Headwinds Tailwinds

Intense competition Increasing alignment between traditional

and third-party capital

Excess capacity limits the potential for

improvement

Improving pricing discipline

Potential for increased inflation Rising interest rate environment

Rates stabilised, but remain under

pressure

US economic growth slows,

but continues

Continued interest from third-party

capital, even beyond prop-cat lines

Use of third-party capital in retrocession

programs reducing earnings volatility

Revised to Stable

41

42

Thematic Session:

Reinsurance

Industry Update

Q & ADr. Mathilde

Jakobsen

Director, Analytics

43

Thematic Session:


Konstantin

Langowski,

Financial Analyst

Charlotte Vigier,

Senior Financial

Analyst

Discussion Outline

44

European Overview

What Is A Segment Outlook

European Segment Outlooks

Looking Forward

European Overview

• Stable economic conditions persist

although achieving growth remains

challenging

• 2018 - Upgrades outweighed

downgrades

• Consolidation - Driven largely by excess

capacity and capital in the

marketplace. Strong competitive

pressures remain as insurers compete

for the same business

• 2019 AM Best segment-specific outlooks

• France non-life & life

• Germany non-life & life

• Italy non-life & life

• Spain non-life

• UK non-life & life

45

European Overview

Challenging economic environment ahead

Source: EuroStat

-4

-2

0

2

4

2010 2012 2014 2016 2018 2020

Average GDP growth (%)

46

European Overview

Persistent low rate environment

Source: OECD

-1%

1%

3%

5%

7%

2010 2012 2014 2016 2018

10 Year Government Rates

Germany Spain France UK Italy

47

European Overview

Insurers retain the confidence of consumers, regulators, and the

market

0%

5%

10%

15%

Market Penetration

Non Life Life Health

0

100

200

300

400

500

600

2010 2013 2016 2019

Insurance CDS levels (bps)

Source: Bloomberg

Note: 5 year CDS, 10 largest European insurers

Source: EIOPASource: Insurance Europe

Note: 2017 Premium to GDP

0

100

200

300

400

EU FR DE IT ES UK

Solo quarterly reported SCR ratios

(%)

2016 Q4 2017 Q4 2018 Q3

48

What is a Segment Outlook

• Examine the current trends in particular segments of

the insurance industry over the next 12 months

• Typical factors considered include: current and forecast

economic conditions, the regulatory environment and

potential changes, emerging product developments,

and competitive pressures

• AM Best’s Market Segment Outlook can be positive,

negative, or stable, like a Best’s Credit Rating Outlook

for a company

• Many segments covered internationally

49

AM Best Segment Outlooks

France

• Non-Life: Stable

• Life:Stable

Germany


• Life: Negative

Italy


• Life: …

Spain


UK

• Non-Life: Negative

• Life:Stable

50

0

1,000

2,000

3,000

FRANCE ITALY UNITED KINGDOM GERMANY

Life technical provisions, 2016 & 2017 (EUR billions)

Other than unit-linkedUnit-linked

European Life Outlook

Source: OECD, EIOPA, AM BestNote: Average long term guarantees on life insurance with profit participation as of YE

2017

Source: EIOPA

Stable Outlook Negative Outlook

France

UK

Germany

0

50

100

150

200

250

300

France Germany Italy UnitedKingdom

Long-term guarantees vs10 yr rates (bps)

Avg Guar Avg 10 Yr Rate

51

+3.3% +3.9% +1.5%-0.9%

France Non-Life Outlook

Stable Outlook

Resilient performance driven by generally good

diversification of business profiles in the face of

intense competition and challenging market

conditions

Headwinds

Favourable pricing

indicators

Business mix generally

well balanced

Good capitalisation

Tailwinds

Ongoing intense

competition

Weak technical

equilibrium

Low investment

income

80

90

100

110

120

Non-life market

Property - Individual

Property - Commercial inc agricoles

Motor

Source: Fédération Française de l’Assurance

Non-life combined ratio (%)

52

Spanish Non-Life Outlook

Stable Outlook

Insurers demonstrate solid technical

fundamentals, with good performance and

strong balance sheets, although sustained

political instability could test the sector

Robust but slowing

national economy

growth

Strong technical

performance

Regulatory reforms

TailwindsHeadwinds

Political instability

Regulatory reforms

80

90

100

110

120 Non Life Motor Health

Source: AM Best calculations based on ANIA data; ANIA; GDV, FFA; DGSFP; ICEA


Selected Countries: non-life

combined ratio (%)

53

80

90

100

110

120

2008 2010 2012 2014 2016 2018

France Spain

Italy Germany

Italy Non-Life Outlook

Stable Outlook

The stable outlook reflects the sector’s ability to

maintain strong technical profitability in spite of

very low economic growth and political

uncertainty

Headwinds

Significant exposure to

Italian sovereign bonds

Political instability

Economic fundamentals

Tailwinds

Strong technical

profitability

Prices stabilising for

motor business (50%

of non-life market)

Growth in strongly

profitable non-motor

sector

Source: AM Best, based on analysis of data from ANIA

100

150

200

250

300

350

1/18 4/18 7/18 10/18 1/19

80

90

100

110

Market combined ratio

Motor combined ratio

Non-motor combined ratio


Italy-Germany 10 Year Bond

Spread (bps)

54

Germany Non-Life Outlook

Stable Outlook

Very strong balance sheet and solid technical

profitability, underpinned by sustainable rate adjustments

Headwinds

Solid technical

profitability

Sustainable rate

increases

Tailwinds

Increasingly competitive market conditions

Robust but slowing economy – global trade tensions adversely impact Germany’s export driven economy

80

90

100

110

120

Non-life market Motor

General liability Property


286%

295%2017

2016

Source: Gesamtverband der Deutschen Versicherungswirtschaft e. V. (GDV)

2018*: vorläufiges Ergebnis

SCR II Ratio

55

UK Non-Life Outlook

Intense competition, legislative uncertainty and

potential impact of Brexit on the UK economy weigh

on the segment

Negative Outlook

Headwinds

Implementation of

Civil Liability Bill, with

whiplash and

personal injury

reform

Tailwinds

Competition weakening

technical margins

Brexit and economic

uncertainty

Increased regulatory

scrutiny

Note: Accident Year Combined Ratios

Source: Best’s Statement File – Global, AM Best data and

research; Insurance Times

80

90

100

110

120

130

140

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

Motor Property

Liability


56

Key things to watch…

Political

environment

Regulatory

updates

Innovation and

market disruption

Industry

consolidation

and competitive

pressure

Global trade

flows

57

58

Thematic Session:


Q & A

Konstantin

Langowski,

Financial Analyst

Charlotte Vigier,

Senior Financial

Analyst

59

Thematic Session:

How Critical is Innovation

for Future Success Within

the Insurance Industry?Dr Angela Yeo

Senior Director,

Analytics

Why Is Innovation Important?

60

• It is our view that, as technologies continue to evolve, insurance

companies that fail to successfully incorporate principles of

innovation will be significantly disadvantaged.

• Over time failing to innovate will inevitably lead to an erosion in

their competitive advantage and ultimately their financial

strength.

InnovationWhat is AM Best doing?

61

Innovation and Financial Strength

• Given the significant changes we see in technology, and the rapid pace of

these innovations, over the next years a company’s ability to adapt to a

transforming operating environment will become an increasingly important

indicator of its long-term financial strength.

• Recognising this, AM Best will begin to understand and evaluate the

innovativeness of companies, how they adapt to the changing realities in

the marketplace and how they plan to succeed in the face of ever increasing

disruption.

62

Balance

Sheet Strength

Baseline

Innovation considerations in the rating process

• Historically, AM Best has captured innovation indirectly through the

various building blocks of its rating process.

• The innovation criteria was launched to consider a more explicit

analysis of innovation in the rating process.

Maximum + 2

Balance

Sheet

Strength

Baseline

Operating

Performance

(+2/-3)

Business

Profile

(+2/-2)

Enterprise Risk

Management

(+1/-4)

Comprehensiv

e Adjustment

(+1/-1)

Rating

Lift/Drag

Issuer

Credit

Rating

Country Risk

63

Innovation And Rating Fundamentals

• Innovation is impacting the consumers / policyholders:

– Insurance providers to be judged on consumers’ experience

– Moving expectations: consumers increasingly want more leisure time

– Moving from claim payer to service provider: creation of ecosystems

• Innovation is changing the nature of risks:

– From individual to group

– From retail to corporate

– To increasing cyber risk

Balance

Sheet

Strength

Operating

Performance

Business

Profile

Enterprise Risk

Management

64

Innovation And Rating Fundamentals

• Impact of big data on selection and cross-selling

• Innovation leading to:

– Improved efficiencies

– Reduced transaction costs

– Consolidation / mutualisation in the hunt for scale and synergies

• Emerging risks

Balance

Sheet

Strength

Operating

Performance

Business

Profile

Enterprise Risk

Management

65

Technology Focus

66

Internet of Things and Insurance

Property/Casualty Insurance

• Use of data collected in

underwriting and claim

management

• Improve customer interaction

• Automation of commercial

underwriting, risk management,

and claims processes

Life/Health Insurance

• Help in prevention and

diagnosis of health insureds

• Chance to expand insurability

• Improve underwriting and

promote incentives for healthier

lifestyles

67

AI/Big Data and Insurance

• Predictive modeling can help claims decisions in

P/C and health segments

• Enhanced customer experience through growing

automation

• AI/Big Data allows for customised products

• Fraud detection

68

The State of Innovation in the

Insurance Industry

69

Innovation Survey

65%

21%

5%

9%

Property/Casualty Life/Annuity Health Reinsurance

Survey conducted in August 2018

More than 450 respondents

From nearly 50 countries

70


How Critical Is Innovation to the Success of

Your Organisation?

1%

12%

30%

42%

15%Not critical

Somewhatcritical

Moderatelycritical

Very critical

Extremely critical

71


The Primary Reason Innovation

Is Important to Your Organisation Is…

3

4

6

8

10

11

16

21

22

Other

Managing cost/expense

Growing in existing markets

Revamping the business model

Expanding to new markets/products

Improving risk selection

Realizing operational efficiencies

Gaining a competitive advantage

Addressing customer needs

72

Notes:

Numbers are percentages


What Approach Best Describes Your Firm?

%

Our current innovation strategy is a key component of our overall strategic objectives 45

We are developing an innovation strategy that will be aligned to our overall strategic objectives 35

Our current innovation strategy is important but not explicitly aligned with our overall strategic objectives 8

We do not have an innovation strategy nor do we plan to create one 6

We are developing an innovation strategy but it will not be explicitly tied to our overall strategic objectives 6

6

21

56

13

4

0% <1% 1% to 5% 6% to 10% >10%

What Percentage of Your

Company’s Annual Budget

Is Allocated to Innovation?

73


What Does/Did Your Organisation Perceive as the Biggest

Challenges to Developing the Innovation Process?

7

20

23

29

44

53

61

Other

Legal/regulatoryenvironment

Funding

Knowledge barriers

Organizational culture

IT limitations

Human capital/specialized talent

74

Notes:

Numbers are percentages


Draft CriteriaScoring and Assessing Innovation

75

Innovation – AM Best Definition

• A multi-stage process…

• … that transforms ideas

into new or significantly

improved:

- Products

- Processes

- Services

- Business models

• … that have measurable positive impact over time and enable an

organisation to stay relevant and successful …

Ste

p

1

Ste

p

2

Ste

p

3

• … and can be organically grown or adopted from external sources.

76

Innovation Score

AM Best scoring:

Innovation Input Score

+ Innovation Output Score

= Innovation Score

77

Scoring System

Innovation leader

Innovator

Adopter

Reactor

Non-innovator

Highest

Lowest

28 and

higher

23-27

12-17

18-22

<12

78

Innovation Input Score (1 to 4 for each component)

Leadership

Score

Culture

Score

Resources

Score

Processes and Structure

Score

+ + + Innovation Input

Score

=

Leadership Culture

ResourcesProcesses and

Structure

79

Innovation Output Score (1 to 4 for each component)

2 x (Results + Level of Transformation) Innovation Output

Score=

ResultsLevel of

Transformation

80

Innovation Input Score Example

Company A Scoring:

3 (Leadership Score)

3 (Culture Score)

2 (Resources Score)

+ 2 (Processes and Structure Score)

= 10 (Innovation Input Score)

81

Innovation Output Score Example

Company A Scoring (2X):

2 (Results)

+ 2 (Level of Transformation)

= 8 (Innovation Output Score)

82

Final Innovation Score

Company A Scoring:

10 (Innovation Input Score)

+ 8 (Innovation Output Score)

= 18 (Innovation Score)

83

Example: Scoring System for Company A

Innovation leader

Innovator

Adopter

Reactor

Non-innovator

Highest

Lowest

18-22

84

How will the new criteria impact ratings?

• Innovation is currently captured indirectly through the building blocks of the

rating process

• As a result, AM Best does not expect significant rating movements

stemming from the updates

• However, AM Best believes that the ability to address accelerating

technological and societal changes through innovation will be increasingly

critical to (re)insurers’ long-term financial strength

• Draft of new criteria procedure “Scoring and Assessing Innovation” open for

comments until 13 May 2019

85

86

Thematic Session:

How Critical is Innovation

for Future Success Within

the Insurance Industry?

Q & A

Dr Angela Yeo

Senior Director,

Analytics

The Insurance Market Briefing will provide a platform for leading AM Best rating analysts and industry experts to discuss the impact of the prevailing economic and political conditions and rating trends for (re)insurers in key segments of the European (re)insurance sector and the London Market. There will also be a number of thematic sessions based on recent AM Best research.

The popular annual Methodology Review Seminar will explore the latest updates to rating criteria and provide participants with a better understanding of Best's Credit Rating Methodology (BCRM) and our proprietary Best's Capital Adequacy Ratio (BCAR) model.

The full agenda will be announced soon.

AM Best’s Insurance Market Briefing – Europe

& Methodology Review Seminar

Tuesday 12 November, 2019:

AM Best’s Insurance Market Briefing – Europe08:30 – 13:00 GMT, followed by lunch

AM Best’s Methodology Review Seminar14:00 – 16:00 GMT etc. venues St Paul's, London

200 Aldersgate, London, EC1A 4HD

There is no cost to attend the Briefing or Seminar, but registration is required as space is limited.

Documents

AM Best’s Insurance Market Briefing - Germany · Kaliforniens (Gesamtschaden $16,5 Mrd., versichert $12,5 Mrd.), und Hurrikan Michael (Gesamtschaden $16 Mrd., versichert $10 Mrd.)