LIFE IN­SURANCE MAY BE­COME UN­VI­ABLE IN EUROPE

Insurance - - INDUSTRY UPDATES -

Source: Reuters, 25 Septem­ber 2013 Ac­cord­ing to an in­dus­try sur­vey by law firm Lin­klaters, re­sults of 100 top ex­ec­u­tives run­ning Europe's largest in­sur­ers in­di­cated that 55 per cent be­lieve it may be­come im­pos­si­ble to pro­vide af­ford­able life cover in Europe. Low in­ter­est rates pres­sure prof­its at in­surance com­pa­nies be­cause they drive down re­turns on their in­vest­ments, such as bonds, which tra­di­tion­ally are a core part of their port­fo­lios. To com­pen­sate, in­sur­ers must ei­ther raise pre­mi­ums or al­lo­cate more money to al­ter­na­tive as­sets such as stocks, which can be more volatile than bonds. Cen­tral banks around the de­vel­oped world have held in­ter­est rates at ul­tra-low lev­els since the fi­nan­cial cri­sis in the hope that cheaper money will spur eco­nomic re­cov­ery. The re­search study found 47 per cent of in­sur­ers do not con­sider Europe a vi­able mar­ket for life in­surance and 46 per cent have pur­sued riskier in­vest­ments to coun­ter­act the im­pact of low in­ter­est rates. A third of the re­spon­dents have shifted their fo­cus to other mar­kets while more than a fifth have plans to fol­low them within three years.

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