Euro area insurers and the low interest rate environment

Elia Berdin, Christoffer Kok, Katri Mikkonen, Cosimo Pancaro and Josep Maria Vendrell Simon

Financial Stability Review, 2015, vol. 2

Abstract: The current environment of protracted low interest rates poses major challenges to euro area insurance companies. This special feature discusses how a prolonged low-yield period might affect the profitability and the solvency of euro area insurers. In the article, it is argued that if interest rates were to stay low for a long time, this could have material implications for the profitability and the solvency of many insurers. However, it is also shown that the impact of low interest rates is likely to differ markedly across insurance companies depending on their business model and balance sheet structure. In particular, the impact is expected to be highest for small and medium-sized life insurers with large government bond portfolios and high guarantees to policyholders that reside in countries where these guarantees are rigid and where contracts embed a long time to maturity. JEL Classification: G00

Keywords: Euro area insurers; low interest rate environment (search for similar items in EconPapers)
Date: 2015-11
Note: 508948
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:fsrart:2015:0002:2

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