Changing laws and regulations could post serious problems for some German life insurers.

Analysts in the London office of Moody’s Investors Service give that assessment in a new review of the German life sector.

German life insurers did better in 2005 than they have in the previous 3 years because of a healthy stock market, improvements in risk management and stabilization in interest rates, the analysts write.

But a flat yield curve and relatively low interest rates could hurt sales and returns on investment portfolios, and tough German tax laws and policyholder profit-sharing rules could limit insurers’ ability to increase profits and build capital, the analysts write.

Moreover, implementation of new financial reporting requirements, such as the International Financial Reporting Standards and the European Union version of “Solvency II,” could cause headaches for small and midsize companies that are unable to adapt quickly enough, the analysts write.

The changes could lead to a new round of mergers and acquisitions in the German life sector, the analysts predict.