Germany

In the context of the planned launch of Solvency II in 2013 it remains to be seen to what extent the regulations and reporting duties will be reasonably proportionate to the intended improvements in risk management. Smaller insurers, at least, could incur considerable strains as a result of Solvency II. With this in mind, it is our expectation that demand for reinsurance protection will increase. Reinsurance will prove particularly attractive as it serves to reduce the amount of required capital and offers greater contractual flexibility compared to other tools.

The insurance industry in Germany profited from an increase in gross domestic product. Yet after-effects of the financial and economic crisis could also still be felt: the historically low interest rates led to a sharp fall in interest income, which constitutes a key pricing component in long-tail lines such as motor liability and general liability. This prompted almost all providers to review premiums in motor business, which particularly in the last four years had been reduced, and impose sometimes appreciable surcharges. What is more, the losses incurred by property and casualty insurers in Germany climbed by around 2.4% to EUR 43.1 billion. Major factors here were winter storm “Xynthia”, which cost the industry around EUR 500 million, as well as the protracted period of frost at the beginning of the year, which resulted in additional claims expenditure of around EUR 400 million for German insurers. The combined ratio for property and casualty insurers consequently increased, especially in the homeowners’ comprehensive line.

The German market is served within the Hannover Re Group by our subsidiary E+S Rück. As the dedicated reinsurer for the German market, the company has for decades been a sought-after partner thanks to its good rating, highly developed customer orientation and the continuity of its business relationships.

E+S Rück is very well positioned in our domestic market and continues to be the number two player in Germany, the second- largest non-life reinsurance market in the world. It ranks first in the reinsurance of motor business.

The brighter developments on the primary side also had positive implications for our motor portfolio: margins under our proportional treaties were better, while non-proportional arrangements benefited from an improved premium level in the original business as well as increased reinsurance premiums.

Personal accident insurance, which remains one of our target lines, developed favourably. We acquired new clients in the year under review, while at the same time assuming larger participations with existing accounts. Our premium volume consequently showed further growth. In terms of the loss situation, too, we are highly satisfied with the business development in accident insurance. In the year under review we further extended our range of services, which include inter alia training programmes for cedants in matters of underwriting and claims assessment.

Industrial fire business fared considerably better than expected in the year under review. We profited from the absence of significant losses in this regard.

The loss situation in the engineering lines was satisfactory overall for our company in 2010, although the insurance of wind turbines has still to turn a profit on account of various serial losses.

Business developed favourably in general liability insurance, which delivered a positive profit contribution thanks to a combined ratio under 100%.

The German market recorded a major loss in the year under review in the shape of winter storm “Xynthia”. The impact on E+S Rück was, if anything, below average at EUR 4 million for net account. A further strain was incurred in connection with a pharmaceutical claim. The combined ratio for our German business improved to 94.0% (103.1%) in the year under review.

We succeeded in cementing our position as one of the leading reinsurers in the profitable German market in the year under review. With our gross premium volume showing modest growth, we are highly satisfied with the development of business on our domestic market in the face of sometimes challenging conditions.