The Value of Curiosity
Liane Hirner, CFRO of VIG, has a strong belief in the merits of listening. It is a trait that has helped her navigate the shifts seen in life insurance in recent years, including macro volatility and the advent of trends
There is another strand to the life insurance shift – consolidation. Markets around the continent have seen consolidators poised to step in and take up legacy life portfolios which have been hamstrung by unworkable guaranteed liability demands, legacy IT systems and inefficient processes.
A wave consolidation has been predicted for some time. So far this has not materialised, as regulatory distrust weighed heavily on the market. But things might be about to change, according to participants at the Life-Re Europe conference.
“I think every insurance conference over the last 30 years, I’ve heard the future will be different,” said Tilo Dresig, CEO of Viridium, one of the largest consolidators in Germany. “But there’s so much pressure [on the life market], I tell you, this time it’s going to be different.”
In Germany, specifically, a fragmented market, which has some 80 life insurance players, has “significantly” lost competitiveness compared to other forms of retirement savings being sold in the market. Products offered by banks, asset managers and others do not have the burden of guarantees and have captured the changing savings behaviour of newer customers. Even so, many life insurers may be continuing under an illusion of optimism.
“It’s interesting to see when you speak with someone who has a €30 billion book and feels, on a relative basis, actually really large and good about life,” Dresig said. “With €30 billion you have 2% market share. I’m not sure in which industry you reasonably think that with 2% market share you can be ever become competitive.”
Bernd Neumann, CFO at Frankfurter Leben Group, another major consolidator in Germany, spoke about the pressure on the country’s traditional life insurance market resulting from the reduction in new business.
“Younger people don’t make deferred annuity contracts for old age provision, they buy ETF saving plans which are much more flexible and much cheaper,” he said. “So we have less new business and a lot of life insurance companies.”
The future for the traditional players does not look particularly rosy. While change is needed, implementing new policy administration platforms is “very, very expensive,” according to Sven Wagner, Principal & Consulting Actuary, Milliman. Consolidation platforms, with their modern policy administration structures are trained in migration.
“They can do that faster and cheaper,” Wagner said. “We are very sure that we will see a number of transactions in the next years.”
Tilo Dresig
CEO, Viridium
Zurich-Viridium
How many transactions and how fast, still remains open question. One of the landmark deals never to make it to completion was the sale of Zurich’s German back-book to Viridium, a deal which was blocked in 2024 by the local regulator, BaFin, due to concerns over the latter’s ownership by PE-group Cinven. Last year, Cinven sold its Viridium holding to a consortium of major insurers and asset managers. That may have soothed the regulator.
“I think the regulator knows the life insurance market has issues in Germany,” said Wagner. “Working together with the market, with the providers and regulators, we can solve the issues.”
Dresig, indeed, feels Viridium is in a strong position to show off its own business model given the success it has had in turning around insurers in its portfolio. He admits regulatory concern – but believes the facts should counter this.
“The life insurance sector is very cautious,” he said. “This is a super-sensitive product, and it’s totally normal that regulators are especially careful with this. The good news is now, after 12 years, we can show the results.”
Outside Germany
While Germany was the focus for Life-Re’s speakers, there is opportunity to consolidate in other countries. Dresig said the company has been looking at France as a potential market.
“We feel the market is large enough and they have the same structural topics – i.e. legacy back books that are low performing and have issues.”
Still, for a German consolidator to move into another European market, is by no means an easy task. Dresig said cross-border synergies “are very limited.”
“At the end of the day, it’s a local business,” he said. “The products are different, the language is different, the tax is different, the regulator is different. We have some synergies, for example, on the on the investment side, but it’s not very significant.”
A cross-border consolidation business is most likely to be attractive for companies where the main focus is asset management which offers more international synergies, he added. In the long run, how receptive regulators are in the rest of Europe, may well be decided by Germany’s experience.
