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The policy of the european central Bank to the advantage of insurers

by

Frédérique De Simone

14 March, 2019 09:30

The historically low interest rates that hurt insurers, european will continue to put pressure, provides the firm’s credit rating Standard & Poor’s (S&P). The accommodative monetary policy extended until at least 2020 by the european central Bank and easing macro-economic are concerned.

“Given the levels of cover already relatively low, insurers have little margin of manoeuvre to reduce the guarantee rate without harming their competitiveness,” says the firm’s rating.

The latter adds that in order to stimulate a short-term profitability, management teams may change the asset allocation. “This would help insurers to stay afloat, but there may be other significant risks, such as the volatility of asset prices, the exposure to currency and liquidity risk,” adds S&P. The firm noted that insurers are required to stay up to date, as some changes are already underway.

Life insurers have already been affected

The life insurers in europe are particularly affected by the measures of the central Bank. These increase the risk of negative spreads between yields on investments and the interest rate guaranteed.

“The european central Bank will delay rate increases and prolong its quantitative easing program. It will also continue to reinvest in its asset purchase program. A third cycle of refinancing operations longer-term is also expected, ” says the firm’s rating. So it will be possible to keep interest rates and yields on long-term investment.

The firm S&P believes it is ” extremely important that insurers continue to focus on the profitability of their underwriting activities in the current context, where the combined ratios of means (losses and expenses) have been bred in Europe in recent years. European insurers already have solvency regulatory and fund-specific robust, ” concludes the firm’s rating by S&P.

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