Germany’s Federal Financial Supervisory Authority (BaFin) confirmed reports it is approaching 30 to 40 insurance companies with significant alternative asset holdings. This focus stems from the complexity of these investments.
At some insurers, private debt makes up over 30% of their portfolios, while alternative investments reach up to 70%.
Norbert Pieper, a BaFin spokesperson, emphasized the need to monitor these high exposures. He noted that managing complex assets requires solid risk management, adequate staffing, and specialized knowledge.
This oversight forms part of BaFin’s 2025 supervisory agenda. The regulator’s 2025 risk report highlights a 2024 investigation into insurers’ investment strategies.
The focus remains on companies showing potential for weaknesses, especially regarding real estate and credit default risks.
Germany’s economic performance declined in both 2023 and 2024, with GDP falling 0.3% and 0.2%, respectively.
Trade barriers emerged from supply chain disruptions and political isolationism, impacting export-driven firms. Meanwhile, higher energy costs and carbon-neutral transitions strained businesses.
Amid these challenges, insolvencies rose in the third quarter of 2024. Regular insolvency filings increased by 13.7% compared to the previous year.
This trend heightened concerns over potential loan defaults, especially as insurers extend corporate loans. As of December 31, 2023, such loans represented 4.2% of insurers’ portfolios.
Insurers also slightly increased commercial real estate holdings, reaching nearly €164 bn by the second quarter of 2024, accounting for about 8% of total invested capital.
However, commercial real estate prices fell by around 17% from mid-2022 to Q3 2024. Residential real estate values dropped 8% over the same period. Rising interest rates, persistent inflation, and increasing construction costs drove these declines.
A 2024 survey of insurers and life insurance undertakings (Pensionskassen) revealed that companies devalued commercial real estate holdings by roughly 7% as of December 31, 2023.
Despite this, BaFin expects insurers to handle the risks related to commercial properties. These assets carry less weight in portfolios compared to interest rate and spread risks for life insurers and underwriting risks for non-life insurers.
