Liability Insurance

German companies are able to secure liability insurance under favourable conditions at affordable prices. German liability insurers have again achieved positive results. This means they can still offer their corporate customers attractive solutions. Only a few industries such as automotive suppliers suffered a number of major losses, costly for the insurers. In such industries, insurers have a greater need to obtain risk-related data from their corporate customers. Some companies with costly damages in the past may be charged higher premiums by their insurers. On the whole, however, prices for corporate customers are, and will, remain stable.

In the past few years, hospitals benefitted from a wider choice of options for healthcare liability insurance. Existing insurers have extended their range of solutions and new insurers have entered the market.

Companies are continuing to digitise production processes and supply chains. As a result, many companies find themselves preoccupied with the question of whether their insurance policies will be affected by digitisation measures already in place or being planned in the near future. In particular, liability between suppliers and purchasers often needs to be redefined.

International companies have to put much effort into the design of legally compliant cross-border insurance programmes (key word: compliance). Insurers take different stances on this issue. This makes it difficult for companies to compare the offers made by different insurers. Constant changes to tax and supervisory law in many countries make this task all the more challenging. Uncertainty about Brexit is already prompting some insurers to request the inclusion of specific clauses in their insurance policies that take account of the consequences of a possible Brexit. On this issue, companies have to be vigilant to prevent any disadvantages that could arise were they to renegotiate their policies too soon.

Market Situation

According to results for the third-party liability segment for 2017, published by GDV, the German Insurance Association, private individuals and companies in Germany paid EUR 7.8bn, 1.5 per cent more than in the previous year. The combined ratio of 93 per cent was positive for insurers.

For 2018, an increase in revenue to EUR 8bn is expected for the liability insurance line. The combined ratio forecast of 92 per cent has slightly improved. It is therefore understandable that, from the insurers' perspective, liability insurance remains an attractive business, even if some industrial liability insurers are reporting combined ratios of more than 100 per cent due to high individual losses

The number of insurers offering industrial liability policies in Germany still remains high. In addition, the new insurers who have entered the market in recent years have continually been extending their range of services, particularly in the liability insurance line.

Last year, a number of automotive suppliers suffered major losses. These losses are affecting the results of the liability insurers concerned, now more cautious in this field. Consequently, price reductions or improved insurance conditions are only rarely offered to automotive suppliers. Digitisation and the challenges this brings for suppliers will further intensify the requirements surrounding suppliers' insurance protection. To meet these requirements, brokers and insurers are working on new concepts for these clients.

The trend towards digitisation (in particular the digitisation of production and delivery processes) is also increasing in many other industries. As a result, a growing number of companies have defined specific requirements regarding their liability insurance cover. Many companies are also setting up new subsidiaries in order to develop completely new business fields involving digitisation.

Demand by companies for new liability insurance solutions is constantly on the rise. If adequate insurance cover is to be obtained at reasonable rates and conditions, intensive dialogue is often required between customers, brokers and insurers in order to clarify the new risk conditions for all parties involved.

Outlook

The liability insurance market will remain largely buyer-friendly. Insurers’ reticence towards a small number of industries won’t change the general picture in the short term.

Insurers are aware of the new challenges arising from the digitisation of the economy. The dialogue between customers, brokers and insurers about the required solutions will continue to intensify. Companies are demanding both modified and new insurance solutions from insurers.

For midwives and obstetricians assisting with childbirth, there is still no adequate or generally affordable liability insurance cover available in the market. This is another reason why the number of self-employed midwives and obstetricians assisting with childbirth has continued to decline. According to their professional associations, the number of gynaecologists and midwives has now fallen below 1,000 in each of these two professional groups. Insurers are de facto no longer competing for these customers. Several years of debate between public bodies and the liability insurers have so far failed to change this situation. Calls will continue to grow for a government-backed solution to preserve these two professions.

Market Trends

The new model declaratory action ("Musterfeststellungsklage") law for private individuals is set to enter into force on 1st November 2018. This law was passed by the German Bundestag (Parliament) in June and the Bundesrat (Federal Council) in July.

Under the new law, qualified institutions such as consumer associations will be entitled to bring actions on behalf of at least 50 consumers to establish whether there is any foundation for their respective claim. This would then be the basis for determining the amount of damages for each of these consumers. To abridge the proceedings, the Oberlandesgericht (Higher Regional Court) at the place of jurisdiction will always be Court of First Instance. It will continue to be possible to file an appeal before the Bundesgerichtshof (Federal Court of Justice).

Some political parties and consumer associations are clearly critical of the amendment to the German Code of Civil Procedure (Zivilprozessordnung, §§ 606 ff ZPO-E), stating that it would not go far enough. Liability insurers are taking a different point of view; the concept of the German class action similar to the U.S. model is already being hotly debated, with the corresponding effects on the liability insurance policies of the companies concerned. The amendment to the German Code of Civil Procedure, in any case, facilitates consumers' litigations and is consequently welcomed by many organisations that represent consumers' interests. In the light of the claims that are already known, it can be expected that the model declaratory action will applied immediately it enters into force.

Since 1st January 2018, sellers and suppliers have enjoyed extended legal liability under the new sections of the German Civil Code (429 (3) and 445a BGB). A subsequent increase in liability claims, as forecast by a number of insurers, has not materialised thus far. Nevertheless, companies are advised to review their respective liability policies to establish whether they meet the legal liability requirements in full.

With the introduction of the new EU General Data Protection Regulation (GDPR) on 28th May 2018, all companies have become subject to clearly stricter liability standards when handling personal data. The companies have been - and largely still are - busy with the implementation of the associated requirements. To date, no damage claims due to breaches of data protection regulations are known. However, the relevant section of the new GDPR (Section 82) is receiving much attention as it is likely to become a new statutory basis for claims and is being hotly debated by insurers and customers. Until now, it was not possible to claim in such a direct manner compensation for personal suffering in combination with damages claims. Section 82, however, now makes it much more easy to bring forward such claims. As a result, companies have to check whether their current insurance policy for deliveries and services also covers financial losses in accordance with the GDPR.