As one of the biggest insurance markets in Europe, Germany holds significant potential for innovation in the life sector. Changing modes of business have seen the country’s back-book consolidation market grow, with Viridium and Frankfurter Leben two of the main companies leading the transformation.
However, momentum has been challenged in recent times. In 2022, Zurich announced it was due to sell its German back book to Viridium, which approximated to some €21 billion in assets under management. But the deal collapsed two years later, after it was blocked by Germany’s financial regulatory authority, BaFin, concerned over the ownership of Viridium by UK private equity company, Cinven.
Things may be about to shift though. Last year, Cinven sold Viridium to a consortium formed of Allianz, Blackrock, T&D and others – and that may offer hope for a revival of the Zurich deal. According to Fitch Ratings, the deal should be completed later this year and will kick start the country’s consolidation market.
“Given that the [Viridium] ownership has changed, and the fact that Zurich itself said last year that the book is up for sale again, we are pretty sure the sale of the Zurich book will happen this year,” says Dr Christoph Schmitt, director at Fitch. “That’s about a €20 billion book. We assume that others will follow.”
Schmitt estimates a further €5 billion likely coming to market in smaller deals once the Zurich sale goes through, though there is potentially “well over” €100 billion of closed funds that could become available for consolidation in future.
“Most [German] insurers would be happy to get rid of their old books
once their volumes shrink to unprofitable levels.”
Much of the drive to consolidation in Germany comes from a pressure to get rid of older, unprofitable closed books, which are tied to legacy system and burdened by high guaranteed rates.
“Most [German] insurers would be happy to get rid of their old books once their volumes shrink to unprofitable levels,” Schmitt says.
The desire to shed legacy businesses is likely to grow over time. Even so, getting rid of these older books is not without its complications. Germany’s financial regulator, BaFin, has taken a safety-first approach to the business, calling for deals to be first placed in separate legal entities which adds to the burden and cost.
“It is a complicated process selling a back book, and results in notable expenses even prior to the sale,” says Schmitt. If you have a closer look at who has sold business so far, you will realize it was almost all from insurance companies where ultimate ownership is not German.”
The conduct of business supervision will remain one of BaFin’s supervisory priorities with regard to life insurance. This is to ensure that insurers take adequate account of the value for money of their products. Apart from that, BaFin will continue to pay particular attention to the investment behaviour of insurance undertakings.
As in the past, BaFin expects some consolidation in the German life insurance market (whereas singular transactions have already been announced). However, there are no particular indications for a considerable “wave of consolidation”.
The life insurance market in Germany is characterized by long-term guarantees, in particular. Investments in German life insurers ought to be planned for a correspondingly long period. Against this background, the investment of closed-end funds can be viewed critically. Apart from that, we would point out that there is no trend towards PE investors in the German (life) insurance market.
No, this is not planned. Generally speaking, the primary objective of insurance supervision is the protection of policyholders and beneficiaries. To this end, BaFin ensures that the interests of the insured are adequately safeguarded and that the obligations under insurance contracts can be fulfilled at all times.
Longevity reinsurance is booming in the Netherlands. What are the drivers and will the rest of Europe follow suit? What occupation should you pursue if you want to live longest? According to the panel on longevity at Life-Re Europe, librarian
It has been long talked about but consolidation could be coming to Europe in a big way as participants from Viridium and Frankfurter Leben discussed at Life-Re Europe.
Has the PRA crashed the funded re market? That is the question many are asking following its recent proposal to hit the UK’s funded re business with a 10% capital charge.
Asset intensive reinsurance (AIR) has taken hold in life markets around the world. Europe, though, is a different story. But does Europe really need AIR?
Life-Re Europe held its first event in April. From longevity to reinsurance, assets to regulations, the forum covered a manifold range of key topics for the European life insurance market.
Regulatory certainty is key to a flourishing life reinsurance market. At Life-Re Europe, regulators showed receptivity to this newly emerging market development.
©2025 Life-Re