German health insurance ‘strong’ but uncertainties lie ahead – Fitch

Written by Michael Griffiths

27/01/2023

The impact of current high inflation on the profitability of German private health insurers’ should be limited, Fitch Ratings has stated, due to their ability to adjust prices.

However, the credit reference agency suggested the anticipated recession may decrease the demand for private health insurance products.

According to a new report published by Fitch, the German health sector’s profitability declined in 2022, despite starting from a strong position. Claims growth increased by 4%, following two years of low rises due to the pandemic.

Along with slower premium growth in 2022, caused by a decrease in the discount rate used to calculate long-term reserves, this has led to an increase in the combined ratio. However, Fitch said it expects the average ratio to remain comfortably under 90% in 2022-2023.

“The rise in market interest rates has relieved pressure on health insurers, who no longer need to make large price adjustments to compensate for the declining discount rate,” Fitch said.

“Fitch therefore expects premium growth in 2023 to remain moderate at about 3% despite inflation-driven price rises.”

In its outlook report on Germany published in October, Fitch forecast a recession in the country in 2023.

“This may result in lower demand for both full coverage and supplementary products, as economic uncertainties may make individuals hesitant to switch to full-coverage private health insurance,” Fitch added. “It may also decrease demand for company health insurance, the sector’s fastest-growing product.”

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