Frédérique De Simone
February 22, 2019 09:30
Life insurers will suffer if interest rates remain low, according to the claims of the firm’s credit rating Standard & Poor’s (S&P), in its report, With European Insurers Well Positionned For Economic Uncertainty, the Focus Shifts to the Future.
Insurers should exercise caution, as they provide their clients guarantees that they are not able to return with their long-term investments, advance S&P. Germany, Spain, the netherlands and in some scandinavian countries, the guaranteed rate average is high compared to the return from current investment. The report of S&P mentions between 2.5% and 3.5 %.
The report also brings to light that if a turn in the credit cycle disrupts the global growth, the central banks of the United States, the United Kingdom and the European Union could adopt a monetary policy known as accommodative.
In addition, the Brexit, while manageable, should lead to a global slowdown, create volatility and keep interest rates low. “The maintenance of low interest rates has been depressing the earnings of insurers, in particular those of life insurance companies who provide investment returns guaranteed to policyholders, the report says. In this scenario, the ratings of some insurers offering such products may be under pressure “, say the analysts of S&P.
Thus, in Germany, in Spain and in France, life insurers are focusing on traditional savings products with guaranteed return. The analysts of S&P also add that in recent years, life insurers in europe have responded to the low interest rates by adjusting the characteristics of their products, such as the rate guarantees of their activities of savings and traditional.
The investment returns for p & c insurers in europe has also suffered from the low interest rates and reduced margins observed over the last decade. Therefore, the insurers have sought to generate a profit from subscription and have achieved strong combined ratios in the past two years.
It must be remembered that the insurers of theeuropean economic Area (EEA) are faced with important updates to their guidelines, whose entry into force is expected in 2019 and 2021.