Market Guide: Life Insurance and Pensions in Germany 2006

This report is most appropriate for companies looking for an overview of the life insurance and pensions markets in order to assess the level of market opportunity (using our market data and forecasts), regulatory barriers and opportunities, and level of competition in the market. For more detailed market data please refer to Datamonitor's European Life and Pensions Interactive Database 2006.

Report Highlights


The January 2005 amendment to the Retirement Income Act removed the tax exemption on payouts at maturity for all new life insurance contracts, restricting this tax benefit to pension contracts only. This dampened demand and premium income from new life assurance business (excluding pensions), year-on-year, declined by 21% to EUR14.7bn. The amendment to the Insurance Supervision Act eliminated the requirement for an insurance-based pension benefit guarantee when employers transfer book reserve pension schemes to pension funds, which allows the pension fund to use higher mathematical provisions. Ultimately, this is expected to improve the competitiveness of German providers. A draft bill on the amendment to Germany's Insurance Contract Act was passed in March 2006 and is to be enacted by January 2008. The revised contract will limit the surplus (of premiums over benefits paid) that insurers can hold by specifying that up to 50% of this excess sum is to be redistributed to policyholders' contracts within two years.
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EXECUTIVE SUMMARY - MARKET HIGHLIGHTS 3
Market overview 3
Market forecasts 3
Market regulation 3
Competitive market structure 4
Market leaders 4
INTRODUCTION 10
What is this report about? 10
Who is the target reader? 10
How to use this report 10
CHAPTER 1 MARKET OVERVIEW 11
Introduction 11
Over the last 5 years, pensions have accounted for a growing proportion of life and pensions premium income 12
The proportion of premium income attributed to individual policies declined slightly in 2003 and 2005 14
The proportion of premium income from unit-linked insurance has grown steadily in the last five years 16
Bonds consistently account for at least 50% of the investment assets of life and pensions insurance companies 17
CHAPTER 2 MARKET FORECASTS 19
Introduction 19
Key findings 19
Over the next 5 years, premium income is set to grow at a compound annual rate of 5.7% 19
CHAPTER 3 MARKET REGULATION 21
Introduction 21
Key findings 21
The Federal Financial Supervisory Authority regulates the German insurance sector 22
The Insurance Intermediary Directive creates a single passport for insurance intermediaries and enhances consumer choice 22
Insurance companies which belong to financial conglomerates face additional supervisory requirements 23
Amendments to the Insurance Supervision Act permit insurance companies enhanced flexibility in financial management 23
The implementation of the Pension Fund Directive expands the market for occupational retirement provision 24
New regulations improve the flexibility of pension funds, but subject them to additional reporting obligations 24
Insurance companies are subject to revised guidelines on investment management and internal control procedures 25
Upcoming legislation will enhance consumer protection 25
Imminent reform of the Insurance Contract Act creates a more complex operating environment 26
CHAPTER 4 COMPETITIVE MARKET STRUCTURE 28
Introduction 28
Key findings 28
Domestic life insurance companies represent 34% of the German life & pensions market, by number 28
The top 5 life insurers control 34% of the market, by premium income 30
CHAPTER 5 MARKET LEADERS 32
Introduction 32
Key findings 32
Allianz is the life insurance market leader, based on premium income 32
AachenMünchener Leben trails the market leader in the life insurance sector 32
R+V Lebensversicherung AG ranks third among life insurance companies 33
Hamburg Mannheimer LV is the fourth highest ranked life insurer by premium income 33
Zurich Deutscher Herold rounds out the top 5 life insurers 34
APPENDIX 35
Definitions 35
Capital redemption policy / bond 35
Composite insurer 35
Defined contribution pension scheme 35
Defined benefits pension scheme 35
Group policy 35
Individual pension scheme 35
Individual policy 35
Life assurance 36
Occupational pension scheme 36
Pension insurance policy 36
Premium income 36
Regular premium 36
Riester contract (Altersvorsorgevertrag) 36
Single premium 37
Technical provisions 37
Traditional insurance 37
Unit-linked insurance 37
Further reading 37
Interactive Databases 37
Reports and Briefs 37
Wealth, Investments & Protection writing team 38

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Table 1: Life and pensions insurance premium income, segmented by product, EURm, 2001-2005 12
Table 2: Life and pensions insurance premium income, segmented by product, in percentages, 2001-2005 13
Table 3: Life and pensions insurance premium income, segmented by buyer, EURm, 2001-2005 15
Table 4: Life and pensions insurance premium income, segmented by buyer, in percentages, 2001-2005 15
Table 5: Life and pensions insurance premium income, segmented by investment risk, EURm, 2001-2005 16
Table 6: Life and pensions insurance premium income, segmented by investment risk, in percentages 17
Table 7: Investment assets of life and pensions insurance companies, EURm, 2001-2005 18
Table 8: Investment assets of life and pensions insurance companies, in percentages, 2001-2005 18
Table 9: Life and pensions insurance premium income, segmented by product, EURm, 2006-2010 20
Table 10: Life and pensions insurance premium income, segmented by product, in percentages, 2006-2010 20
Table 11: Number of life insurance and pensions providers, segmented by type, as at Dec 2005 29
Table 12: Top 5 life insurers by premium income, as at Dec 2005 31


Figure 1: With compound annual growth at 8.1%, increases in pensions premiums have outstripped premiums from life insurance 12
Figure 2: Individual policies account for the majority of life and pensions premium income, but group policies have grown more rapidly 14
Figure 3: Compound annual growth in premium income from unit-linked insurance has outstripped growth in non unit-linked premiums 16
Figure 4: In 2003, there were slight declines in the proportion of equity and property investments of life and pensions insurance companies 17
Figure 5: Pensions will account for an increasing proportion of the growth in premium income between 2006 and 2010 19
Figure 6: Pensionskassen (staff pension investment funds) dominate the market, by number 28
Figure 7: Allianz leads the German life insurance sector 30

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