German insurance industry brainstorming for financial relief.
Germany is making international insurance news as its life insurance companies attempt to come up with new strategies that will help to dig themselves out of the financial trouble that the country’s low interest rates are causing for them.
The insurers within this largest economy in Europe are looking into various different ways to overcome the drop in income they are suffering from their investments. Some of them include offering policyholders shorter maturity guarantees for their policies, or greater flexibility.
According to Maximilian Zimmerer, the head of Allianz Life, “I would expect that we will see a bit of everything in the market.”
At the beginning of 2012, the Finance Ministry of Germany made international insurance news by cutting back the minimum interest rate. This reduced the rate that the insurers in the country are permitted to offer on their new policies. Before that time, it had been 2.25 percent, but that fell to 1.75 percent.
This change increased the struggle faced by insurance companies in competing with the interest rates that were being paid by banks. However, Germany’s Finance Ministry did take this into account and therefore gave some insurers a bit of buffer space when they’d already had their investment income reduced from their safe government bonds.
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The GDV insurance association held a conference on April 18, which requested that the European Central Bank alter its expansive monetary policy in order to give long term interest rates a chance for “sensible development”.
According to Rolf-Peter Hoenen, the president of the GDV, said that “Price stability cannot become a secondary goal of the ECB.” He expressed that the low interest rates are forcing insurance companies to have to come up with a source of income from other forms of investment.
Zimmerer, who will soon be joining the Allianz SE board – the parent company of Allianz Life – will also be taking on the finance responsibility for the insurer, and has explained that as things stand, there isn’t much appeal to the German Bund government bonds, which he feels are now overvalued.
The latest international insurance news shows that almost 90 percent of the investment portfolios of the insurers in Germany (currently worth a total of 743 billion Euros), is in fixed-income paper.
Article: Latest international insurance news shows German insurers seeking strategies around low interest rates
Article Source: Live Insurance News
Author: Julie Campbell