Fitch downgrades German market outlook

Fitch Ratings has today changed the outlook for the German non-life insurance market to negative from stable following structural changes in the market. The outlook reflects the agency's view that there will be more downgrades than upgrades in the sector in the next 12 to 18 months.

Fitch expects the soft cycle in non-life insurance to continue well into 2009 in both private and commercial insurance lines. In the area of commercial and industrial insurance, the entrance of new competitors into the German market as well as increased capacity by exisiting players is lowering rates and makes profitable growth very difficult.

While the German non-life market has been historically very profitable, the agency is expecting structural changes on the insurance supply side to lower overall profitability in the future.

The competitive environment, says Fitch, is expected to increase beyond historical levels and will affect both private and commercial and industrial lines.