New statistics on insurance companies in the euro area and Germany
The European Central Bank is today announcing initial figures from a new set of statistics on insurance companies (including pension institutions) in the euro area. These figures are based on data compiled and contributed by the euro-area member states’ national central banks. The Bundesbank is concurrently making the results for Germany available.1 The heightened interest in high-quality statistics on the insurance sector is due to the powerful influence exerted by this sector on the overall income and financing cycle and on asset formation in the euro-area member states. Insurers are therefore not only key players in the reallocation of economic risks but are also significant contributors to financial intermediation.
Insurance companies make up Germany’s second most important financial sector. Their aggregated balance sheet assets, at around €1.9 trillion at end-2010, equate to about one-quarter of banks’ total assets (see Annex 1). More than half of this amount was accounted for by life insurance companies and just under one-fifth by pension institutions (Pensionskassen, pension funds, occupational pension schemes for the self-employed and various supplementary pension schemes). The statistics are therefore heavily influenced by the financial situations of the life insurance companies and pension institutions. It therefore comes as no surprise that the bulk of the insurance technical reserves – the most important item on the liabilities side – is composed of net equity of households in life insurance reserves and in pension institution reserves. In actual fact, households in Germany hold just over one-quarter of their total financial assets as net equity in the insurance sector.
The investment side of the aggregated balance sheet of the insurance sector reveals, strikingly, the relatively large weight of deposits with banks. This item is composed largely of debentures and promissory notes issued by banks, which are reported as deposits with monetary financial institutions in accordance with the European statistical accounting rules known as the European System of Accounts 1995 (ESA 95). Merging these items with the bearer instruments reported as debt securities results in a percentage of securitised assets of nearly 40%. The second most important investment vehicle after securitised assets turns out to be investment fund shares/units – largely specialised funds – accounting for around 25% of all investment. Funds invested as direct loans (14%) are another important vehicle; however, they also include the deposit claims placed by reinsurers with their assignors. The investments designated as “unquoted shares and other participating interests” (10%) are composed mostly of participation interests in group companies within the insurance sector.
Whereas the liabilities of insurance companies and pension institutions – with the exception of reinsurers – are owed almost exclusively to residents, enterprises diversify part of their investments to other countries. It is particularly bearer debt securities, subscribed investment fund shares/units and participating interests that contain foreign shares. In a recent special survey of life insurance companies, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)) found that foreign investments make up just over one-third of life insurers’ portfolios. Visible country risks were extremely limited.
In the European context, well over one-quarter of the euro area’s estimated total assets (€6.9 trillion) were held by insurance companies and pension institutions resident in Germany. French insurers were level with the German insurance sector, which means that the German and French companies together make up more than half of all the euro-area insurance business written. This means that, within the EU, there is a very close link between the individual countries’ economic power and the significance of the insurance sector. However, there are exceptions in cases where private insurers and pension institutions play a greater role in the old-age pension system, such as in the Netherlands, where resident pension funds obtain considerable inflows of funds from occupational retirement schemes.
The statistical data on insurance companies in Germany, based on end-of-quarter and end-of-year figures, can be obtained from the Bundesbank’s website in table form or as a time series by visiting the following URLs.