TY  - UNPD
A1  - Berdin, Elia
A1  - Gründl, Helmut
T1  - The effects of a low interest rate environment on life insurers : [version july 2014]
T2  - SAFE working paper series ; No. 65
N2  - Low interest rates are becoming a threat to the stability of the life insurance industry, especially in countries such as Germany, where products with relatively high guaranteed returns sold in the past still represent a prominent share of the total portfolio. This contribution aims to assess and quantify the effects of the current low interest rate phase on the balance sheet of a representative German life insurer, given the current asset allocation and the outstanding liabilities. To do so, we generate a stochastic term structure of interest rates as well as stock market returns to simulate investment returns of a stylized life insurance business portfolio in a multi-period setting. Based on empirically calibrated parameters, we can observe the evolution of the life insurers' balance sheet over time with a special focus on their solvency situation. To account for different scenarios and in order to check the robustness of our findings, we calibrate different capital market settings and different initial situations of capital endowment. Our results suggest that a prolonged period of low interest rates would markedly affect the solvency situation of life insurers, leading to relatively high cumulative probability of default for less capitalized companies.
T3  - SAFE working paper - 65 
KW  - Life Insurers
KW  - Interest Rate Guarantees
KW  - Risk Assessment
KW  - Solvency II
Y1  - 2014
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/34777
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-347774
UR  - http://ssrn.com/abstract=2480330
IS  - version july 2014
PB  - SAFE
CY  - Frankfurt am Main
ER  -