Market

Financial situation of the sector:

Many life insurance companies are only benefiting to a limited extent from the higher interest rate environment. Due to negative market values as a consequence of higher interest rates and relatively low new business volumes, they have limited free liquidity that they can actually be (re-)invested at higher interest rates.

Operational stability:

The IT systems for life insurance back-books are often outdated. Processes and documents are often still maintained manually. The necessary experts to operate outdated IT systems are increasingly going into retirement.

In addition, the number of tariff structures in primary insurers' portfolios is very high. Historically, primary insurers constantly developed new products and tariffs. Accordingly, existing IT systems are complex and costly to maintain. Primary insurers have to comprehensively renew their IT platforms and harmonize their structures in order to manage contracts in a modern way in the long term.

The effect is further worsened by decreasing portfolio sizes, which increase the costs per contract: The effort associated with modernization only pays off if a significant number of policies are subsequently managed on the platform (scale effect).

Strong fragmentation of the life insurance market:

The German life insurance market is unusually fragmented: There are currently more than 80 life insurers in Germany.