German life insurance market trends

The German life insurance market continues to see shifts in new business volume and the management of legacy contracts. Data from the German Insurance Association (GDV) indicates a continuing decline in long-term care annuity insurance. In 2025, new policies fell to 5,374, marking the sixth decline in seven years and bringing the market share to approximately 0.1 percent. This is a significant drop from the peak of nearly 34,000 policies in 2013.

Policyholders are navigating the complexities of older capital life insurance contracts. Many policies issued between the 1990s and mid-2000s carry guaranteed interest rates as high as 4 percent, which contrasts sharply with 2026 contracts offering approximately 1 percent. Experts advise against premature cancellation due to potential loss of tax-free status for pre-2005 contracts and the impact of cancellation fees on surrender values. Options for managing these high-interest legacy contracts include maintaining the policy, opting for premium waivers, or selling contracts on the secondary market.

Recent financial guidance emphasizes that these older contracts remain significantly more valuable than modern 1.0 percent alternatives. This context is heightened by broader economic pressures, such as inflation reaching 2.9 percent as of August 2026, which can erode the purchasing power of funds held in traditional savings accounts offering minimal interest. Recent studies further indicate that while many life insurance policies pay out more than the premiums paid, their actual annual returns can be negative when accounting for duration and cash flows.