GERMANY - Germany's insurers have cut with-profits payments for the second year in succession.
In a survey of 89 companies, covering 95.8% of the market, the industry rating agencyAssekurata reported the average rate for the coming year as 4.22%, slightly down on last year’s 4.29%. Assekurata chief executive Rainer Will said rates had hit “rock bottom”, and added that in the short term at least, any rise was unlikely. Cuts were mostly down to the need to beef up reserves ahead of the EU’s Solvency II regulations.
The report shows with-profits payments, which make up up to 20% of some pensions,have been cut by up to 50%.
Pension products are worse affected than life insurance products – Riester Rente customers will receive rates of around 4.14%.
The country’s second biggest provider, Hamburg Mannheimer, has cut its average rate from 8.5% to 5%.
Germany’s biggest provider, Allianz has kept rates stable at 4.7% this year, after dropping them from 5.3% last year. Ironically, the cuts come on the back of a record year for Germany’s insurance industry.
Both Hamburg Mannheimer and Allianz have announced best ever new business figures for 2004 as customers rushed to take advantage of the last few days of tax-free payouts on insurance products. Under the terms of the new Retirement Income Act, which came intoforce on 1 January, 2005, payouts on insurance products will now be taxed. AllianzLeben’s new business was up 38.6% on 2003. New business at Hamburg Mannheimergrew a slightly more modest 16% to e326m.
Hamburg Mannheimer chairman, Dr Götz Wricke, said rates had been kept at what he called “a satisfactory level”. Valued reserves and safety funds now totalled e3.5bn, 10.2% of invested assets, he said. “We are assuming the Solvency II process will bring with it increased demands in terms of insurance businesses’ company capital. From thatperspective, with our capital provision, we’re well prepared.”
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