EU watchdog is now calling for a joint effort to help to counter the risks presented by the rates.
The latest insurance news in the European Union includes a call from the insurance watchdog for a joint action among all of the national regulators for helping to counteract the negative impact that the low interest rates are having on the financial security of insurers.
This will help those companies to be able to protect policyholders more effectively and at a lower cost.
This topic has been making insurance news for some time, as insurers across Europe – including Allianz, the current largest company in the European industry – have been creating redesigned products in order to be able to compensate for the exceptionally low interest rates. For instance, they have been changing their savings products by limiting the guarantees for new customers.
The reason for this insurance news is a worry that there will be a repeat of Japan’s 1997 to 2001 experience.
Both regulators and insurers worry that they will become involved in insurance news like that affecting the companies in Japan during that span of time. In those years, seven insurers fell victim to very low interest rates and finally failed.
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The watchdog that is at the heart of this insurance news is the European Insurance and Occupational Pensions Authority (EIOPA). It has stated that it is willing to work alongside the top financial watchdogs in each nation in order to help to decide on the “scope and scale” of the risks that are presented by the very low interest rates to the various insurers. They will also challenge business models that they deem unsustainable.
The chairman of the EIOPA, Gabriel Bernardino, released a statement in which he said that a number of the supervisors of those national organizations are already making a variety of different efforts and are implementing initiatives designed to help to manage this issue. However, he added that joint action will be required to effectively withstand the potential impact of the low interest rates.
In this insurance news statement, he said that “By coordinating these actions, EIOPA is committed to ensure a consistent supervisory approach and a fair and equitable treatment to policyholders.”