Monday, June 1, 2015

EU watchdog warns of QE pressure on insurers




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EU watchdog warns of QE pressure on insurers


[FRANKFURT] The European Central Bank's money printing programme known as quantitative easing (QE) is putting additional pressure on the bloc's insurance companies and pension funds already beset by low interest rates, the EU's insurance watchdog said on Monday.
"Today's macroeconomic reality is creating severe challenges for certain insurance and pension fund business models," Gabriel Bernardino, Chairman of the European Insurance and Occupational Pensions Authority (EIOPA) said in the watchdog's financial stability report.
Quantitative easing had further lowered the 'risk free rate,' thus increasing the value of future liabilities while simultaneously cutting the value of assets on insurers' and pension funds' books, the watchdog said.
"In the insurance sector, returns and profitability of products remain under strong pressure with a potential negative impact on solvency," the report said.

Mr Bernardino urged financial supervisors to scrutinise closely the business models of companies under their purview to make sure they are sustainable.
Big companies like Allianz, Axa, Generali and Ergo are seen as having the financial strength to withstand pressure from low interest rates, but many smaller players are seen as at risk.
Low interest rates may drive further consolidation in the reinsurance sector, EIOPA said.
REUTERS

German inflation higher again in May: data

German inflation higher again in May: data

[FRANKFURT] Inflation in Germany, Europe's biggest economy, crept higher in May with consumer prices rising by 0.7 per cent year-on-year, preliminary data showed on Monday.
The index had risen in April by 0.5 per cent on a 12-month basis, the federal statistics office Destatis said in a statement.
Using the Harmonised Index of Consumer Prices (HICP) - the yardstick used by the European Central Bank - inflation in Germany also rose by 0.7 per cent year-on-year in May, still way under the ECB's annual inflation target of just below two per cent.
The May data are still only preliminary, since they are based on consumer price statistics from only six of Germany's 16 regional states.
Final data from all 16 states will be published on June 16, Destatis said.
The data nevertheless appear to confirm that the ECB's monetary policy measures are slowly beginning to push up inflation.
In March, the ECB embarked on a massive trillion euro (US$1.1 trillion) bond purchase programme to ward off deflation and end stagnation in the eurozone economy.
AFP

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