Low interest rates in the euro area pose substantial challenges to the life insurance industry. Insurers—particularly in Germany and Sweden—offer their clients long-term policies, sometimes more than 30 years, without holding assets of a correspondingly long duration. Moreover, many policies contain generous return guarantees, which are unsustainable in today’s low interest rate environment.
In 2014, stress tests showed European life insurers are vulnerable to a “Japanese-like” scenario.
Filed under: Advanced Economies, Economic outlook, Economic research, Europe, Finance, Fiscal policy, growth, IMF, International Monetary Fund, Multilateral Cooperation, Reform | Tagged: Europe, European Union, Germany, interest rates, Japan, Life insurance, pension, stress tests, Sweden, United States | Leave a comment »