LIFE INSURANCE MAY BECOME UNVIABLE IN EUROPE
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.