#COMING BACK TO LIFE BOOK FREE#

In Germany, for example, legacy insurance portfolios contain products with guarantees sometimes even up to 4 percent annually, says the report.ĭigging into the numbers at Allianz, the company’s 2020 annual report shows that its average minimum guaranteed rate in these products is 1.9 percent in Belgium, 1.8 percent in Germany, 1.5 percent in Switzerland and 1.3 percent in Italy. “The combination of high guaranteed annuity rates, longevity improvements, together with the low interest rate environment and a lack of very long dated assets make these products the most complex to manage,” says the report, titled ‘European Life Insurance Back Book Management 2017’. Truth is that sustainable growth and innovation need capital investments.Īccording to a survey by PwC in 2018, the deferred annuity business is the most concerning area for European insurers in light of the latest developments.

#COMING BACK TO LIFE BOOK FREE#

To ensure that they are able to service these obligations, they have to tie up more capital for such guaranteed products under the latest Solvency Capital Requirement directives.Īre there ways to free up capital from the older block of business with higher guarantees, while continuing to deliver on customer promises? Continue reading to find out. Although rates have drastically declined since, insurers have to keep old promises, even under very different market conditions. The problem is magnified in life insurance products that guarantee a certain rate, such as some legacy products carried over from a time when benchmark rates were high.

And when the market interest rates languish near zero, it becomes difficult to earn healthy returns for customers.

The interest rates on such instruments are based on market conditions. Since life insurance spans the entire life of a customer, such portfolios are traditionally heavy on long-term and relatively-safer investments such as bonds, which are interest-paying IOUs. Humans, however, live way longer.more than 70 years on average at last count. If the insurance customer was a mayfly, then the credit risk would span just 24 hours and few borrowers would go bankrupt that fast.

Coming back to life book