SWISS RE NEW SIGMA STUDY - FACING THE INTEREST RATE CHALLENGE Freitag, 12. Oktober 2012 - 10:41
4/2012 NEW SIGMA STUDY - FACING THE INTEREST RATE CHALLENGE
Interest rates affect all insurers, but the impact differs by line of business and also by product. Add this to the fact that interest rates can be highly volatile, and that it would be foolish to believe that interest rates can be predicted mid- to long-term with any reasonable precision. Therefore, insurers need to be prepared for all possible interest rate scenarios. Swiss Re’s sigma 4/2012, "Facing the interest rate challenge", explores the impact of interest rates on insurers and explains why a rapid rise in or sustained low interest rates can be a challenge for the road ahead.
"Short-tail business profitability in non-life is only marginally affected by interest rates, and long-tail non-life business interest rate risk can be contained with proper asset-liability management. Yet when interest rates are low, the only way for non-life insurers to maintain profitability is to raise premium rates," explains sigma co-author Astrid Frey.