Altijd leuk om bevestigd te worden ;-)
By Anita Greil
Of DOW JONES NEWSWIRES
ZURICH -(Dow Jones)- Insurance companies are facing lower profits in the years ahead, as record low interest rates coupled with tighter regulatory standards are hampering their investment returns, a study by one of the world's largest reinsurance companies found Tuesday.
Insurance companies tend to invest conservatively and hold most of their assets in government and highly-rated corporate bonds, said David Laster, one of the authors of a new study published by Zurich-based reinsurance company Swiss Re (RUKN.VX).
That is becoming a problem because such safe assets typically have relatively modest returns.
In the aftermath of the financial crisis, government bond yields have reached historically low levels "that may persist until the global economy truly recovers," Swiss Re cautioned.
What is more, changes in regulatory standards--including mark-to-market accounting and higher risk charges on certain assets--could lead insurers to invest even more in low-risk, low-return assets, the study said.
"There is a risk that after this crisis, new regulation will be too restrictive," Thomas Hess, chief economist at Swiss Re, told Dow Jones Newswires in a phone interview.
European regulators are working on a new set of rules, dubbed Solvency 2, which aim to set common standards for European insurers that will come into force by the end of 2012. The new standards will introduce market valuations and risk-based measures of assets and liabilities when determining how much capital insurers need to hold.
Swiss Re warns that the new rules could backfire, if they discourage insurers from investing in certain asset classes. Insurers could be tempted to allocate their assets to government securities at a time when yields are extremely low and sovereign bonds are no longer fail-safe investments.
"What seems to be a safe investment from a mark-to-market standpoint may become a very bad investment from a yield perspective," Hess said. "Super safe government bonds, such as U.S., U.K. or German Treasuries, will not default, but they may have a terrible performance."
(END) Dow Jones Newswires
November 23, 2010 03:14 ET (08:14 GMT)
© 2010 Dow Jones & Company, Inc.