Low-interest-rate environment puts German insurers under pressure Our Financial Stability Review highlights how the low-interest-rate environment is increasingly weighing on German life insurers. The low interest rates mean that it is ever more difficult for them to generate the guaranteed returns. The maximum technical interest rate for life insurers’ portfolios – which generally equals the guaranteed returns – is an average of 3.2%.
By way of comparison: the average current yield on public sector bonds with an original maturity of more than four years was recently around 1.3%. Insurers need to respond. Their capital buffers are shrinking. The coverage ratio, which is the ratio of regulatory capital to regulatory capital requirements, dropped from around 186% in 2009 to just under 169% at the end of 2012.