The Influence of a Low Interest Rate on Life Insurance Companies
The Influence of a Low Interest Rate on Life Insurance Companies

Author(s): Silvie Kafková, Dagmar Linnertová
Subject(s): Financial Markets, Socio-Economic Research
Published by: Masarykova univerzita nakladatelství
Keywords: life insurance; low interest rates; guaranteed returns;
Summary/Abstract: A protracted period of low interest rate threatens the stability of the life insurance industry, especially in the countries, where life insurance with comparatively high guaranteed returns disposed in the past represents a major portion of the total portfolio. The aim of this paper is to provide an introduction to evaluation of the effects of the actual low interest rate period on the balance sheet of a representative life insurance company. Firstly the balance sheet of insurance companies is introduced. We show the valuation of the assets and liabilities. Then the Solvency Capital Requirement and risk margin is defined. Finally the solvency situation of insurers is valuated.

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