Cut down of the guaranteed rate of return
The German government is no longer willing to bail out insurers as it has done for bankers during the financial crisis. Voices are being raised against the level of guaranteed return of the insurers currently set at 1.25%. This rate is deemed to be too high while the low-rate period is feared to continue.
In 2014, the Bundesbank launched a wake-up call cautioning that more than one third of life insurers would not be able to maintain their shareholder’s equity criteria by 2023 in case the interest rates are kept at low levels.
The regulators warned of an imminent intervention to lower the floor rate at 0.9%. German life insurers offered an average guaranteed rate above 2% in 2015.
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