German insurers vow to keep classic life policies
BERLIN (Reuters) - Germany's insurers pledged to continue offering traditional guaranteed life insurance savings policies, though possibly in altered form, in the face of debilitating low interest rates and euro debt crisis aftershocks.
"Life insurance is certainly not some discontinued model," Markus Faulhaber, head of Allianz's (ALVG.DE) German life insurance unit, told a news conference of industry trade body GDV.
Many German life insurers, including Allianz and Munich Re (MUVGn.DE) unit Ergo, have been tinkering with new products that move away from life-long yield guarantees, which insurers find increasingly costly to fulfil.
Low interest rates are squeezing the margin between what an insurer can earn on investments in government bonds and what it has to pay out to policy-holders. This has prompted insurers to retool their products in the hope consumers will accept less guarantee in return for higher yield.
"We assume that there will still be demand for guarantees in the market," said Faulhaber, who represents the life insurance sector at the industry body. "Guarantees will remain an important element in insurance contracts."
More than 60 percent of Germans see protecting their investments as their No. 1 priority, a study by insurer Gothaer showed.
Allianz and Ergo plan to launch their new life products around the middle of the year but have revealed few details in view of stiff competition. Insurers say that explaining the new products to consumers could be a major hurdle.
Allianz has previously said it would offer the new policies alongside traditional savings products that guarantee a minimum interest rate over the lifetime of the policy.
The GDV said the German insurance sector saw overall premiums rise by 2 percent to 181.7 billion euros ($236.5 billion) in 2012 and expects similar growth in 2013.
"We are pleased with the premium development, not least considering the ongoing euro debt crisis," GDV president Alexander Erdland told the news conference.
Life insurance premiums rose by 0.6 percent to 87.3 billion euros in 2012, while cancellations fell to a 20 year low, underscoring consumer confidence in their policies, GDV said.
Insurers must continue to build out their product offering for capital market-linked savings products, to meet the future needs of a burgeoning generation of pensioners, GDV said.
"But to do that, life insurers need a supervisory framework that allows them to offer all customers attractive savings products in a period of prolonged low interest rates," Erdland said.
Regulators should take this consideration into account in finalising new risk-capital rules for insurers known as Solvency II that are expected to take effect from around 2016, he said.
Private and employer-organised retirement programs should also be exempted from a planned tax on financial transactions aimed at dampening speculation in Europe, Erdland said.
The GDV said property and casualty premiums saw their strongest growth in 17 years in 2012, rising 3.7 percent to 58.7 billion euros. While all property-casualty segments grew, the strongest rise was seen in car insurance, where premiums rose 5.4 percent to 22.0 billion euros.
(Additional reporting by Jonathan Gould in Frankfurt, editing by Mark Heinrich)