November 8, 2012 / 9:43 AM / 5 years ago

Berlin eyes interest rate threat to insurers -paper

FRANKFURT, Nov 8 (Reuters) - Germany’s finance ministry is mulling a further cut to the rate insurers can guarantee their customers on savings policies, aiming to offset pressure on the sector from low government bond yields, a German newspaper reported,

Citing government sources, financial daily Handelsblatt quoted the minutes of a meeting between the Finance Ministry and German parliamentarians as raising concerns about the “weakest fifth” of German insurers, who face risks beyond 2018 if low interest rates persist.

Handelsblatt quoted government sources as saying the Finance Ministry and markets watchdog Bafin were also considering a suspension of the guaranteed rate altogether, to lighten the financial burden insurers are facing.

Rock-bottom interest rates on the government bonds in which insurers primarily invest are slowly eroding insurers’ ability to make good on their long-term obligations to policy holders.

Europe’s biggest insurer Allianz warned earlier this year that low interest rates could create a fresh financial market bubble, thus sewing the seeds of the next crisis.

The Finance Ministry declined immediate comment on the newspaper report. Bafin was not immediately available for comment. (Reporting by Jonathan Gould; Editing by David Holmes)

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