Markets and business climate

For the insurance markets 2008 consisted of two profoundly different phases: while the first phase was still characterized by a relatively stable and flourishing environment, an economic downturn prompted by the intensifying financial crisis set in from around the middle of the year and progressively encompassed virtually all regions and markets around the world. At the latest by the fourth quarter the real economy worldwide was entirely dominated by the economic slump – which slid into recession with increasing impetus; insurance markets were also heavily impacted in view of their close interlinking with the real economy and their status as an integral part of the financial system. Although the international insurance industry was affected significantly less markedly than the banking sector, the experience of past economic crises was once again reinforced – namely that in times of economic uncertainty most consumers initially cut back their spending on decisions relating to investments, provision and risk protection that involve long-term financial commitments in favor of ensuring their ability to meet the needs of daily life.

Particularly for providers operating on the international life insurance markets, 2008 thus brought a number of adverse factors: in the first place, as large institutional investors on the international financial markets, life insurers were hard hit by the repercussions of the financial market crisis – declining yields for government bonds, substantial price losses on equities and considerable upheavals on credit and money markets as a consequence of a steadily spreading general loss of confidence in financial assets. It must be assumed that the high volatility on capital markets and the low interest rate level for fixed-income securities have led to a significant weakening of the capital base of life insurance companies. A further cause for concern was the softening demand for life insurance products against the backdrop of a virtually worldwide recession and the associated restraining effect on purchasing power and the demand trend among consumers in the affected countries. What is more, some markets saw the entry into force of changes in the legal and regulatory environment, which ushered in new requirements for insurance undertakings.

On property and casualty insurance markets, where premium growth is also in large measure dependent on macroeconomic conditions and the development of the economic climate, providers similarly found it increasingly difficult to achieve their sales, volume and profit targets. The pressure on insurance results emanating from the price competition prevailing in numerous lines was further exacerbated by the major loss situation – which was notable for a series of devastating natural catastrophe events. These included, in particular, snow- and ice-storms in several Chinese provinces, winter storm “Emma” in Europe, the severe earthquake in the Chinese province of Sichuan, hailstorms in Germany as well as hurricanes “Gustav” and “Ike”, which caused extensive damage along coastal regions in the Caribbean and the United States. The latter produced insured losses in the order of USD 20 to 25 billion, of which around USD 3 billion were attributable purely to damage to drilling rigs and oil platforms in the Gulf of Mexico.

The Talanx Group is represented in the world’s most important markets by various subsidiaries in numerous lines of insurance and reinsurance business. For details of the development of individual insurance markets please see the corresponding annual reports of our Group companies transacting insurance business in the countries concerned.