Frankfurt At first glance, rising interest rates are good news for life insurers and pension funds. Investments offer them opportunities for higher returns. They can also more easily meet the capital adequacy requirements.
“But even in the current interest rate environment, there are significant challenges for the industry,” said Bafin insurance supervisor Frank Grund at the Handelsblatt strategy meeting for life insurance.
The framework conditions in life insurance have changed completely in the past twelve months. At the conference last summer, the industry was still groaning about the years of low interest rates. These made it almost impossible to generate the sometimes high guarantees that insurers had promised their customers in the past.
With interest rates rising, the situation has basically eased. According to Grund, the Bafin only has around 30 instead of 40 pension funds under intensified supervision. For life insurers, there are around 15 instead of 20 companies.
But the providers are now facing new problems: “Other investments are more attractive again,” explained Grund. He therefore sees the risk that consumers will increasingly cancel their life insurance. A decline in new business and a higher number of exemptions from contributions are possible. “Good liquidity and risk management are particularly important in this situation,” warned the Bafin Executive Director.
The industry has recognized the challenges. Guido Bader, CEO of Stuttgarter Lebensversicherung, pointed out that savings accounts and other banking products are becoming more interesting for investors as interest rates rise. On the other hand, single-premium life insurance policies, which are often used to avoid negative interest on bank accounts, are becoming less attractive.
Björn Bohnhoff, CEO of Zurich Life, added that many people’s ability to save is decreasing as a result of high inflation: “If someone is having difficulties paying the gas bill, how can they do anything for their old-age provision?”
Sentiment in the insurance industry has cooled
So it is not surprising that the mood in the German insurance industry has cooled considerably. According to an economic survey prepared by the Ifo Institute for the GDV insurance association, life insurers in particular rate their current business situation significantly worse than in the previous quarter. “The proportion of life insurers who consider negative business development to be likely in the coming months more than quadrupled in summer to 22 percent compared to spring,” said GDV General Manager Jörg Asmussen.
Still, Bader believes life insurers could continue to make good deals for their customers. During the long phase of low interest rates, many providers of classic life insurance policies that came with a 100 percent premium guarantee said goodbye.
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“Despite rising interest rates, guarantees will not experience a revival,” said Bader. A short-term increase in the maximum technical interest rate of currently 0.25 percent is unlikely. In addition, insured persons could not count on quick and significant increases in profit participation. According to Bader, products with reduced guarantees and fund policies that offer a chance of higher returns have proven their worth.
Normann Pankratz, member of the board of directors of Debeka Versicherungen, therefore emphasized that mixed concepts consisting of guarantees and more promising investments in real assets are particularly promising.
According to Volker Priebe, member of the Board of Management of Allianz Lebensversicherung, customers have now understood that insurers need more freedom in investing in order to achieve higher returns.
The providers could score points in sales by giving private investors access to higher-yielding asset classes. “Insurers also invest in alternative investments such as private equity, which private investors usually do not have access to otherwise.”
The future of the Riester pension is still unclear
The question of how the state-subsidized private old-age provision will continue has not been answered. Many life insurers have withdrawn from the business with the Riester pension, in which the receipt of contributions is mandatory.
The insurance industry has been pushing for a reform of the Riester pension for a long time, while consumer advocates such as Dorothea Mohn from the Federal Association of Consumer Organizations (vzbv) or the actuary Axel Kleinlein are backing new concepts.
According to the coalition agreement, the federal government wants to “fundamentally reform the system of private old-age provision” – and examine the offer of a publicly responsible fund and the legal recognition of private investment products with higher returns than Riester.
State Secretary for Finance Florian Toncar (FDP) only said on Tuesday that this review process would now start. The main focus of the Liberals is on building up a share pension, which, however, is based on the statutory pension.
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