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

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  • Kablau, Anke
  • Wedow, Michael

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. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 2: Banking and Financial Studies with number 2011,02.

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Date of creation: 2011
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Handle: RePEc:zbw:bubdp2:201102

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Keywords: Life insurance; low-interest rate environment; financial stability;

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Cited by:
  1. Ansgar Belke, 2013. "Impact of a Low Interest Rate Environment – Global Liquidity Spillovers and the Search-for-yield," ROME Working Papers, ROME Network 201305, ROME Network.
  2. Berdin, Elia & Gründl, Helmut, 2014. "The effects of a low interest rate environment on life insurers," ICIR Working Paper Series 15/14, International Center for Insurance Regulation (ICIR), Goethe University Frankfurt.

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