Insurance

Unsatisfactory solvency of life insurers

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Unsatisfactory solvency of life insurers. Solvency is an economic term for the solvency of a company. The solvency ratio is a key figure with which the sustainable solvency of insurance companies is measured. A solvency rate of 100 percent is a minimum standard in accordance with insurance regulatory requirements.

Measured against this, it is bad for some German life insurers. According to the evaluation of the current solvency reports of 84 life insurers by the Association of Insured Persons (BdV) and Zielke Research Consult, almost every fourth German life insurer has negative profit expectations or would end up below the 100 percent target if “auxiliary crutches” could not be used.

The continued decline in interest rates burdened

Insurance supervision law does provide temporary transitional measures so that all 84 German life insurers formally meet the minimum quota. But in the end, the hard quota counts without transition relief. Here, 12 life insurers would be below the 100 percent mark. Negative profit expectations are also bad for solvency – because losses usually mean liquidity outflows that weigh on solvency. The worst thing is when both come together: a “pure” solvency ratio below 100 percent and negative profit prospects. A few life insurers are also affected.


The bad situation has one cause: the persistently low-interest rates. They make it increasingly difficult for life insurers to generate sufficient income to represent the minimum rate of return guaranteed in most insurance contracts. Although the companies still benefit from higher-interest investments from the past, these expire over time and can only be replaced with less profitable new investments. Many a contract becomes a subsidy business.


The situation has even worsened recently, as interest rates have continued to decline since the beginning of the year at the latest. The monetary policy of the ECB and other central banks does not suggest a turnaround in interest rates in the foreseeable future. On the contrary – the end of the decline in interest rates may not have been reached yet. Nevertheless, the BdV analysis does not mean that two dozen life insurers in this country are on the verge of bankruptcy. It only shows that the interest rate situation is gnawing at the substance, a worrying state that must not last forever.

Do not just draw conclusions on the supplier side

  • -Some companies have already drawn their conclusions and say goodbye to old-style life insurance with guaranteed interest rates.
  • -On the consumer side, you’re not quite as consistent.
  • -There are still more contracts than German citizens. High time to think about alternatives.

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