Under the reasonable projection mentioned above, the debt-to-GDP ratio will remain roughly stable until 2020 before rising significantly in the next decade.8 That’s not a favorable longer-term forecast, all the more so because it is importantly the result of demographic changes that have been expected for decades.
Whilst many insurers benefit, for some insurers with long-term guaranteed liabilities low interest rates in the short-term increase the value of liabilities, which has implications for insurer’s solvency. In the long-term, low interest rates reduce the insurer’s return on assets, which may require premiums to increase to compensate.