Life insurers are unlikely to lower guaranteed interest rates

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Life insurers are unlikely to lower guaranteed interest rates

Life insurers are apparently not lowering guaranteed interest rates

08/20/2020, 3:29 PM | mak, rtr

Allianz logo (symbol picture): The guaranteed interest rate will probably not be lowered for the time being. (Source: Future Image / imago images)

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Life insurance has long been considered a profitable way of providing for old age. But the guaranteed interest rate has been falling for years. It will probably not be lowered any further for the time being – for a banal reason.

According to insiders, German life insurers do not have to lower the guaranteed interest rate on their policies at the turn of the year for the time being. The planned lowering of the so-called maximum actuarial interest rate of 0.9 percent by January 1, 2021 fell victim to the turbulence in the Corona crisis, said several people familiar with the considerations.

The German Actuarial Association (DAV) also assumes that the guaranteed interest rate will not be lowered. "It’s simply too late for that now", said a DAV spokesman in an interview with t-online.de. It took the insurers at least six months to implement the changes.

The DAV, the association of actuaries, has the right to propose the maximum technical interest rate. At the end of last year, she proposed lowering this rate from 0.9 to 0.5 percent by January 1, 2021.

Guaranteed interest
Of the Guaranteed interest is the maximum interest that life insurers are allowed to offer their customers over the entire term of the contract. Usually it corresponds to that Maximum interest rate. The guaranteed interest rate is usually changed on January 1st, but the Ministry of Finance is not bound by the date.

The final decision has not yet been made

According to insiders, the Ministry of Finance even considered allowing a maximum of 0.4 percent. But a reduction has moved into the background because of the challenges surrounding the corona pandemic and the bankruptcy of Wirecard, according to supervisory circles. The Treasury Department said no decision had yet been made on a possible adjustment. The DAV spokesman also said: "There is no decision yet."

In any case, the financial supervisory authority BaFin wants to insist that the insurers no longer develop products with a guaranteed interest rate of 0.9 percent on the savings component. Many simply could no longer afford them because of the low interest rates on the capital market.

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The ministry said that the insurers are not released from their own responsibility to consider which interest guarantees they could still afford. Meanwhile, BaFin has announced that in case of doubt, companies should not wait for instructions from the ministry in order to adjust the guarantees.

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