Insurers prepare for interest rate hikes

Insurers desperate for a change to the low interest rate environment might want to be careful what they wish for, as higher interest rates could lead to an increase in policy surrenders. Hugo Coelho reports on how some insurers have started to adjust their business in preparation for the change

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Central banks’ cheap money has been the favourite weapon of governments to fuel the feeble recovery of the world’s economies and lend struggling banks a hand. But it has been a slow-acting poison on insurers’ balance sheets, diminishing returns on fixed-income portfolios and threatening insurers’ ability to meet long-term guarantees.  

Stress tests conducted in the past two years in Europe have shown that insurers’ capital positions have worsened steadily and