Germany: Looking Ahead with Confidence

In 2025, the German insurance market is expected to write €245.45 billion in premium volume.

The non-life insurance segment looks set to dominate the market, with volume of €146.17 billion forecast for the year.

The switch to a sustainable economy and society, coupled with digitization, are driving profound changes in the insurance market.

For example: The German market has become highly concentrated in recent years. In 2024, the five largest insurance groups together accounted for more than 44% of the market share. The figure was 52% for private health insurance.

Consolidation is driven by the high costs for technology and personnel development, which are often difficult for individual companies to manage—particularly smaller organizations. Collaborative ventures are becoming more important, and mergers are increasing, especially in the private equity sector. Germany is far from being an oligopoly, though. It has more than 10,000 brokers, many looking for their own niche.

As in most countries, Germany’s insurance market faces multiple challenges (climate change, geopolitical tensions and wars, inflation, digitization, a shortage of skilled workers), with companies’ risk situation characterized by growing complexity and uncertainty.

There is light at the end of the tunnel, however. While we are coming out of a tough market phase, individual insurers’ property and casualty capacity reductions have been absorbed by the market as a whole. After a number of difficult years, the insurance sector has slowly overcome the peak of premium increases. It is looking ahead with confidence and expects stable premium growth in 2025.

Market Dynamics: Context

Employee Benefits > Germany’s complex employment laws mean it can be challenging to set up employee benefits. Employee protection laws demand equal treatment, ensuring benefits are provided in a nondiscriminatory manner. Employment contracts play a critical role in regulating benefits and must be reviewed by experienced German employment lawyers.

Employee benefits play a crucial role in attracting talent in Germany, particularly in sectors where competition for top candidates is fierce and salaries are already high. Key industries include IT/high-tech, biotech and life sciences, pharma, engineering, consulting, and finance.

Germany has a comprehensive statutory social security system based on five pillars: pension, unemployment insurance, healthcare, long-term nursing/care, and accident insurance (workers compensation). Employers and employees typically share contributions to social security 50-50.

All mandatory insurances are basic and insufficient, except for health insurance. This is primarily provided through a public health insurance system, the standard of which is high compared with other countries.

Anyone working or residing in Germany must have health insurance. Ninety percent of people in Germany have public health insurance, through which they can receive inpatient and outpatient benefits, prescription drugs, optical and dental, and antenatal and pediatric care.

Property & Casualty > An increase in storms involving high payments will play an important role both in price and insurability going forward.

Most risk carriers continue looking to increase premium rates as part of a raft of measures designed to improve income and earnings. Since severe weather events are becoming more frequent and more intense, natural hazard insurance probably represents the biggest challenge. Discussions regarding compulsory insurance or an alternative opt-out model are in progress.

Premium restructuring appears to have slowly reached its peak in Germany. Insurers in industrial property insurance are continuing their restructuring efforts, albeit with decreasing momentum.

While their market is generally healthy, industrial and commercial liability insurers are coping with major claims for U.S. risks, cyber product liability risks, PFAS, ESG, and European Union legislative initiatives.

Liability risks with a pronounced U.S./Canada exposure—both in the form of local subsidiaries and direct U.S./Canada exports—will remain a strong area of focus. These contracts are subject to special (re-) underwriting, reduced capacities, and a trend toward rising premiums. The increase in large or very large losses in relation to U.S./Canada risks means companies are advised to critically evaluate whether the sums insured are adequate and, in case of doubt, to adjust them.

Market Dynamics: Pricing

Employee Benefits > Healthcare contributions are shared equally between the employer and the employee and are deducted from payroll. Private health insurance is available for individuals whose income exceeds €6,150 per month in 2025. However, this type of insurance is arranged privately and is not typically employer-sponsored, although contributions are deducted from payroll. Unlike with public health insurance, unemployed spouses and children are required to pay individual premiums for private health insurance.

Property & Casualty > Flat premiums are to be expected for liability insurance.

Cyber premiums have been stable for almost two years, thanks to new competition among providers and higher capacities. The upshot of all this is not so much a reduction in premiums, but rather an opportunity for previously uninsurable companies to obtain cover. Premiums are expected to remain the same for the time being.

After several years of turbulence, the D&O market has stabilized at a premium level that remains well above the soft market phases of 2011 and 2018. It can generally be assumed that premiums will remain stable in the upcoming renewal—with opportunities for reductions here and there (in particular for excess policies). However, insurers will assess companies that are not in a strong financial position or are threatened with insolvency more extensively and critically than in previous years.

Market Dynamics: Underwriting

Employee Benefits > Medical underwriting requirements— particularly with regard to disability benefits—are extremely strict in Germany and often lead to exclusions, higher premiums, or complete rejection. Therefore, it is crucial to implement solutions that do not require medical underwriting or any medical questions.

Property & Casualty > The German industrial insurance market remains in a tough phase. The fire sector’s premium increases in recent years are expected to end, while the corresponding trend will continue in the natural hazards sector due to the increasing number of loss events.

Market Dynamics: Capacity

Property & Casualty > Property insurers’ capacities remain tight or are being further reduced by the risk carriers, mostly for difficult types of business. On the casualty side, capacity is largely unchanged from the previous year.

Market Dynamics: Deductibles

Employee Benefits > Since health insurance is mandatory and taken out individually by employees, employers do not provide full medical plans. If employees opt for private insurance, deductibles are common.

Property & Casualty > In property insurance, high deductibles can open up the market and provide attractive premiums for customers. In casualty, an increased need to adjust deductibles can only be identified for contracts with frequent or large claims.

Notable Offerings and Consumer Demand

Employee Benefits > Supplemental benefits have become the new normal for competitive industries. The most important for German employers is the occupational retirement pension, which is common with a 4% contribution of the employee’s annual base salary sponsored by the employer. Payouts are available as a lump sum or annuity at age 67 and subject to income tax. Contributions are tax-deductible.

Other popular benefits to boost recruitment and retention include supplemental risk benefits such as life insurance, total permanent disability, and accidental death and dismemberment. Their approximate level of coverage is twice the annual salary. As mentioned, medical underwriting is very strict in Germany, so avoiding questionnaires is crucial.

Fringe benefits are gaining in importance and extend far beyond remuneration, including childcare support, lunch vouchers, and health promotion programs. They are subject to strict regulation in Germany, so freedom to design such benefits is limited. There are also maximum thresholds when it comes to tax optimization (typically €50 per employee per month).

Regulatory Update

The soon-to-be-introduced German law implementing the NIS-2 Directive will further increase requirements for managers. NIS-2 is the European Union’s augmented cybersecurity framework, which covers a broader swath of industries than the previous structure, requiring a high and shared security level for network and information systems.

This raises an important question for industry and insurers in the nation: if a company is fined for violating the Germany cybersecurity law and seeks compensation from managers responsible for the breach, would any such claim for damages be insured through D&O insurance? The highest court in Germany, the Federal Court of Justice, has submitted this very question to the European Court of Justice for clarification; a decision is pending.

Social security contribution ceilings significantly increased on Jan. 1, 2025. The contribution ceiling for general pension and unemployment insurance rose from €90,600 (or €89,400 in eastern Germany) to €96,600, an increase of over 6.6% (or 8% in eastern Germany). This marks the first time a uniform value applies nationwide.

The increase reflects rising wages and salaries. In 2023, wage growth was 6.44%, up from 4.13% in the previous year.

Notable Differences from U.S.

Employee Benefits > In contrast to the United States, where health insurance is the most important employer-provided benefit, it is almost entirely unheard of in Germany. Health insurance is mandatory in the country and taken out individually by employees.

The No. 1 benefit in Germany is the occupational retirement pension.

Labor law in Germany is strict and comprehensive. Once employee benefits are implemented and offered to workers, it is very difficult for them to be reduced or eliminated.

Tips for Doing Business in Germany

Before implementing and communicating any kind of benefits, it is crucial to first understand and comply with the relevant laws and regulations.

Make sure you have reliable benchmarking data for your industry, as benefits, benefit levels, and types of benefits largely depend on the sector you are competing in. They can vary significantly from one industry to another.