On 4 March 2013, EIOPA published an Opinion on Supervisory Response to a Prolonged Low Interest Rate Environment.
In summary, the Opinion states as follows:
- A persistent low interest rate environment poses real challenges to insurers, particularly to those offering guaranteed rates of return to policyholders. Low interest rates may encourage other business model changes such as alterations in asset allocations in a “search for yield”, which may create new risks on the asset side of the balance sheet;
- EIOPA recommends a coordinated supervisory response in terms of the assessment of future solvency and systemic stability problems and the design and timing of market-wide measures;
- National Supervisory Authorities are encouraged to actively engage with insurers in promoting private sector solutions to address the impact of persistently low interest rates;
- Insurers should carefully consider the impact that their solutions may have on consumers. A fine balance must be achieved in ensuring that consumers are treated in a fair and equitable manner, while also addressing the impact of a prolonged period of low interest rates on insurers.
Please click here for the full text of the Opinion.