German actuaries urge cut in insurance guarantee rate - sources

FRANKFURT Tue Jan 7, 2014 12:41pm EST

Related Topics

FRANKFURT Jan 7 (Reuters) - A professional body advising German regulators on the insurance industry is set to back a further cut in the guaranteed rate of interest that insurers are allowed to offer on savings policies from 2015, as financial pressure on life insurers grows.

The board of the DAV association of actuaries will recommend that Germany's Finance Ministry impose a half point cut in the guaranteed rate to 1.25 percent from the current 1.75 percent on policies sold from Jan. 1, 2015, two sources familiar with the board's decision told Reuters on Tuesday.

The guaranteed rate is a focus for consumers and a headline selling point for life insurers.

Rock bottom capital market interest rates have slashed the income insurers can earn from their investments in bonds and other safe securities, making it increasingly onerous to fulfil obligations to policy holders.

To ease the financial burden on insurers, Berlin has been cutting the guaranteed rate, most recently in 2012. The Finance Ministry is expected to unveil a package of measures in the first quarter to relieve the sector further.

Big insurers with large reserves like Allianz have argued for keeping the guaranteed rate steady, while smaller insurers are struggling with guarantees as high as 4 percent on policies sold up to the year 2000.

The DAV left open the possibility of a smaller, quarter point cut in the rate to 1.5 percent, should the interest rate environment improve, and suggested their recommendation be reviewed in the coming months, the sources said.

The DAV declined to comment but said it planned to make an announcement on Wednesday. (Reporting by Alexander Huebner and Klaus Lauer Writing by Jonathan Gould; Editing by Tom Heneghan)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.