Meeting the volatility challenge of guaranteed products
Volatility in the market means guarantees are getting more expensive. Blake Evans-Pritchard looks at whether companies will be able to continue to offer such products – and what this means for the consumer
In the middle of November, Danish life insurers got a shock when yields on long-term government bonds dipped below those on equivalent German bonds. In Denmark, life insurers were forced to calculate their technical provisions according to the Danish interest rate curve, while most of the hedging strategies are only done in euros, often by buying German bonds.
“This meant that, while technical provisions went up, [life insurers’] assets remained the same because interest rate hedging wasn’t
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