* Law to help industry cope with low interest rates
* Guaranteed rate savings policies to fall to 1.25 pct
BERLIN, July 4 Germany's lower house of
parliament on Friday approved a new law aimed at ensuring life
insurers meet interest rate promises to their customers amid low
returns from government bonds.
The law gives financial watchdog Bafin the power to prevent
insurers from paying out dividends before all promises to
customers have been fulfilled.
To ease the burden on insurers, the law also cuts the
minimum guaranteed interest rate on life insurance savings
policies that insurers will be allowed to offer to 1.25 percent
from 1.75 percent starting next year.
The changes are aimed at shoring up Germany's 93 mainly
small life insurers, many of which are finding it increasingly
tough to service interest rate guarantees as high as 4 percent
on policies sold up to the year 2000 while benchmark 10-year
government bonds currently yield only 1.3 percent.
A study by the central bank showed that by 2023, more than
one third of Germany's life insurers would be unable to meet
regulatory capital requirements if interest rates remain
However, big German life insurers such as Allianz
Munich Re's Ergo and Talanx, as well as
foreign players such as Italy's Generali and France's
Axa, are seen as capitalised well enough to withstand
low interest rates for a prolonged period.
(Reporting by Matthias Sobolewski; writing by Alexandra Hudson;
editing by Jason Neely)