Many life insurance companies promise their customers interest they cannot afford. That the first company to say goodbye to warranty policies, financial supervision is great – and warned: it might be tight for the insurance industry.
The Financial Regulator is behind the plans of the insurance industry to offer life insurance without lifetime warranties. “Given the low interest rates the insurer must act,” said the new head of insurance supervision at the Federal Institute for Financial Services Supervision (BaFin), Felix Hufeld, and the “Handelsblatt” on Tuesday. It is good that the industry working on new products and thus enable consumers more choice. The background: The market leader Allianz and Munich Re subsidiary Ergo offer since early July on life insurance policies for which the guaranteed interest rate no longer applies as usual until the contract expires. Instead, they provide – depending on capital market development – a flexible interest rate in view. Consumer advocates criticize the new models: they would the capital market risk pass on to the customer – at reasonable potential returns and high costs.
Critics say the new products are simply born out of necessity. But how good or bad it really goes to insurers? Short and medium term, the German company could fulfill its promise to appease Hufeld. However, “If the low interest rates last long, it will close, no question about that,” said the financial overseer. “That’s why we require insurers now that they cannot afford a lot from.” That must submit the insurance industry from late summer to the supervision forecasts for the next five years and not just for one year. But that alone, the industry is not out of the woods. Since the beginning of 2013, BaFin incumbent Executive Director defended the view of the international financial overseer, that insurer – such as banks – could be dangerous for the entire financial system. If an insurer tummele outside the traditional insurance business, “he may also not be surprised if another of his risk management is required as from a pure insurance”, Hufeld said. Well as large investors who invested in government bonds, but also in bank bonds, insurers are “highly vulnerable as a creditor.”
The Financial Stability Board (FSB) in the G20 countries had agreed in mid-July nine global insurer, which he considers “global systemically important”, including the Alliance. They should be supervised closely and hold a higher capital base. But there is not uniform capital standard for the industry. Hufeld announced that BaFin will also determine national systemically important insurers in the next one to two years. The supervision hopes thereby to uncover weak points and cross-connections that are not otherwise attracted attention. “We will certainly also require the national key enterprises that they should also play through a possible misalignment”, Hufeld said.