FRANKFURT, May 23 (Reuters) - Germany's financial regulator supports a further cut in the guaranteed rate of interest that the country's life insurers are allowed to offer on savings policies from 2015, a move that would ease pressure on the sector, a newspaper said on Friday.
The regulator, Bafin, has recommended to the German finance ministry that the guaranteed rate be cut to 1.25 percent from Jan. 1, 2015, from the current 1.75 percent, the Euro am Sonntag newspaper reported, citing the watchdog's head of insurance supervision, Felix Hufeld.
A quick decision on the cut was needed to help counteract the drag on insurers from persistently low capital market interest rates, the paper cited Hufeld as saying.
The finance ministry sets the guaranteed rate, which has traditionally been 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 soon 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.
"If there are delays to the decision, it could cause technical problems for insurers to put the reduction into effect," Hufeld told the paper, which released its report ahead of publication on Sunday.
The paper cited a finance ministry spokeswoman as saying there was no set timetable for a decision.
A professional body representing Germany's actuaries earlier this year proposed cutting the guaranteed rate to 1.25 percent from 2015. (Reporting by Jonathan Gould; Editing by Thomas Atkins and Mark Potter)