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Technical insurance

Companies can hope for a stabilizing market.

Growth market with good returns for insurers

As in previous years, risk carriers in engineering insurance again achieved positive results in the past financial year, despite a slight increase in claims payments. This ensures a largely healthy competitive environment and leads to largely stable and attractive premium conditions.

According to current figures from the German Insurance Association (GDV), the premium income of insurers in this country in 2023 in the engineering insurance sector was around 2.8 billion euros. This is an increase of around eight percent compared to 2022, which was thus somewhat higher than in previous years. Claims expenditure (before run-off profits) amounted to approximately 1.6 billion euros, 14 percent higher than in 2022. The combined ratio thus deteriorated from 78.1 to 81 percent.

Market situation and review

The developments of recent years have continued in the past few months. The market for the classic products of engineering insurance remains stable.

Healthy competition ensures attractive conditions for our industrial customers.

In certain segments of the engineering insurance lines, new providers are active in the market, which influences pricing in favor of customers.

There were no cutbacks in deas's very extensive in-house insurance conditions, which continue to ensure very customer-friendly and high-quality protection in the event of a claim.

The isolated demands made by insurers since 2020 for exclusions of consequential cyber losses (silent cyber) and pandemic consequential losses have been concluded. The coverage restrictions demanded have not been fully implemented and the insurers have not made any further demands. This means that deas can continue to offer its customers attractive conditions.

The trends of recent years, such as specialization in the energy, renewable energy, power or construction sectors, will continue in 2024. Securing coverage for fossil fuel-based power generation companies, especially coal-fired power plants, remains very difficult and will become even more so as a result of environmental, social and governance (ESG) issues.

Renewable energies

The total share of renewable energies in energy consumption (electricity, heating and transport) in Germany rose from 20.8% to a total of 22% in 2023. This positive development was due in particular to the increase in renewable energies in the electricity and heating sectors, coupled with a simultaneous decline in demand for energy in all sectors.

In 2023, a record 272.4 terawatt hours (TWh) of renewable electricity was generated. With electricity consumption falling overall (-5 percent year-on-year) due to economic factors, the share of ⁠gross electricity consumption⁠ thus rose to a new record of 51.8 percent. This development was largely due to electricity generation from wind energy and photovoltaics, which provided three quarters of renewable electricity. In the case of wind energy, good weather conditions and an increase of 3,028 megawatts (MW) contributed to a 14 percent increase in electricity generation. This makes wind energy the most important energy source in the German electricity mix. Last year, wind turbines generated more electricity than lignite and hard coal power plants combined for the first time.

Furthermore, an above-average year in terms of precipitation led to an 11 percent increase in electricity generation from hydropower (2023: 19.6 TWh). By contrast, electricity generation from biomass fell by around five percentage points compared to the previous year (2023: 49.3 TWh). The amount of electricity generated by geothermal energy in 2023 was also low at 0.2 TWh.

Biomass continues to dominate the renewable heating supply.

The hedging options for renewable energy plants remain very good. A competitive market and enough providers ensure attractive premium conditions and very good, extensive terms and conditions. In the area of photovoltaic insurance, there are initial attempts by insurers to worsen the contractual conditions.

Difficulties remain and only with extensive know-how can the following areas be covered:

Production, storage, operation and recycling of lithium-ion batteries
Cover for biodiesel plants
Plants for hydrogen production or the production of e-fuels

Market development 2024/2025

The continued weak economic development in Germany and comparatively high interest rates are causing companies to be cautious about investing. Climate change and its consequences, the growing shortage of skilled workers and continued uncertain future prospects will also leave their mark on the engineering insurance sector. By contrast, investment in renewable energies is positive. The market for renewable energies will continue to grow strongly beyond 2024, which means that the demand for coverage for these projects will continue to increase.

For the coming renewal phase of 2024/2025, deas expects the engineering insurance market to remain largely stable and competitive, particularly in view of the fact that the results of the risk carriers are still good. In particular, there is an abundance of providers in the classic machinery and electronics insurance, enabling deas to negotiate attractive prices and conditions for its customers.

Your deas solution

Customer benefit and qualitative market leadership are anchored in our shareholder mandate and thus represent the goal and incentive for our daily work.

Comprehensive and above-market-average coverage concepts for the engineering insurance as well as a well-founded risk analysis by our engineers and claims specialists ensure that we can offer you an optimal service and, above all, the best service in the event of a claim.

Supported by our reinsurance broker, underwriting agent, access to the UK insurance markets and our international network, deas has all the resources and options it needs to make the entire market spectrum available to you.

Andreas Potzelt