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Gauging the impact of a low-interest rate environment on German life insurers

Anke Kablau and Michael Wedow

No 2011,02, Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank

Abstract: A low interest rate environment can pose a key risk to the life insurance sector. A deteriorating return on investment holdings jeopardizes the guaranteed return on life insurance contracts. In this paper, we examine the effect of low interest rates on German life insurers by applying various adverse scenarios to a simple model of life insurers' balance sheets. A low return on investment can lead to a depletion of the bonus and rebate provisions. As a result, life insurers resilience may deteriorate. By way of this analysis, we can model approximately when the bonus and rebate provisions will be depleted.

Keywords: Life insurance; low-interest rate environment; financial stability (search for similar items in EconPapers)
JEL-codes: G14 G21 G28 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-ias
References: View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp2:201102

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