What solutions does the Insurance Sector have in the face of Europe's low interest rate environment?

In early 2015, the European Central Bank (ECB ) decided to engage in Quantitative Easing in order to avoid a deflationary spiral. Our objective, after showing how this low interest rate environment presents a real challenge to the insurance industry, is to propose solutions to deal with this situation.

 We recall the principal theoretical mechanisms at work and carry out a comparative analysis with other historical episodes of quantitative easing in the United States, the United Kingdom and in Japan. Unlike some of these examples, we highlight the difficulties faced by the ECB in trying to pre-emptively raise interest rates based on expected inflation. The euro area seems, at least in the medium term, destined to stagnate in a low interest rate and low inflation environment. We detail the dangers posed by low rates on both the life and non-life insurance sector, and we look at possible strategic solutions to limit risk. We show that optimal asset-liability management is proving more than ever to be the appropriate response to a deteriorated macroeconomic situation for insurance companies. We study the possible techniques for increasing the duration of asset portfolios and reducing the duration gap between assets and liabilities. In particular, we study the benefits of insurers returning to real estate investment or other less traditional assets in order to reduce this duration gap.

What solutions does the Insurance Sector have in the face of Europe's low intere...
(-1.00 B)
Type : Position paper
Date : le 29/11/2016
Complément d'informations

For more information, please contact EDHEC Research and Development Department [research@drd.edhec.edu]

Pôle de recherche EDHEC Value Creation Chair

A voir également

JUBIWEE (COYO GROUP), la start-up qui engage vos collaborateurs
- 13-09-2021
Les 3 cofondateurs à l'origine de Jubiwee en 2016 : Thibaud MARTIN (EDHEC) ; Antoine...
Le Programme Grande Ecole de l’EDHEC intègre le Top 10 mondial du classement FT Masters in Management 2021
- 13-09-2021
L’EDHEC Business School entre dans le Top 10 mondial des meilleurs Masters in...
QS confirme l’excellence de l’EDHEC en classant son Global MBA dans le top 3 Français et son MSc Marketing Management dans le top 10 mondial
- 10-09-2021
     Le Global MBA de l’EDHEC, dans le top 3 Français, continue de performer Le...
Rentrée 2021 : 12 nouveaux professeurs rejoignent l'EDHEC Business School
- 09-09-2021
L'EDHEC Business School est heureuse d'annoncer l'arrivée de 12 nouveaux professeurs-...