Munich Re says cannot live forever with low rates

MUNICH, Germany, July 17 Tue Jul 17, 2012 4:07am EDT

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MUNICH, Germany, July 17 (Reuters) - Munich Re's chief executive has warned that the industry will not be able to live forever with low interest rates which limit insurers' abilities to make money on capital investments while having to pay out guaranteed returns to customers.

"That is placing enormous stress on us," Nikolaus von Bomhard told reporters on Monday evening, adding that certain customer rights to guaranteed returns should be restricted in order to give life insurers more breathing room.

Munich Re manages assets of more than 200 billion euros ($245 billion), making it one of the world's biggest investors.

Banks and insurers should be treated under different regulatory regimes, Bomhard said, adding banks should face stricter regulation, even broken up into commercial banks and investment banks.

Banks should be allowed to go bust and creditors should be made to share losses. "Sharing the burden on the part of creditors is indispensable", he said, adding that this was necessary even if loans were to become more expensive as a result.

In Bomhard's view, the euro will survive as a currency. "However, it is not yet clear in which form", he said, adding the lesson to be learned from the crisis was: "We need more Europe."

At least part of the EU's executive body should be elected directly by the people, he said. ($1 = 0.8170 euros) (Reporting by Christian Krämer; writing by Arno Schuetze)

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