Low interest rates a drag on investment returns for insurance industry

The low interest rate environment and declining investment returns are putting stress on the insurance industry and having a significant impact on re/insurers, Kurt Karl, chief economist for Swiss Re, noted in a blog post on Sept. 5.

“The vulnerability of different lines of business depends on the importance of investment income as a source of revenue and the ability to hedge interest rate risks,” Karl writes.

“Life savings products are more sensitive to interest rates than long-tail non-life products,” he adds. “Non-life insurers can periodically attempt to re-price their products as policies are renewed, allowing them to restore profitability.”