In the current environment of low interest rates, life insurers first of all need to earn the guaranteed interest for the traditional life insurance products. If the returns on the capital markets are not sufficient, there is a risk that returns from disability and term life products will be used to finance traditional life products. Such cross-financing between different products and sources of profit is permitted under supervisory law and is also fully in line with the insurer’s collective business model. However, in this case risk products will receive less surplus participation and the premiums to be paid increase. This potentially affects term life insurances, and especially disability insurance products.
Measuring Future Stability of Disability Insurance Premiums
We disclose which life insurers are strong enough. Those probably won’t ave to reduce the surplus participation for risk products or increase premiums. To this end, we analyzed the future amount of profit participation after accounting for possible shortfalls in capital market returns. This is measured by the Technical Net Rate. The higher it is, the better. In our analysis we assumed a very tough scenario of permanently low interest rates. As a result, in particular those life insurers perform well having high technical profits on the one hand and having no holes to fill caused by low capital market returns on the other.
On winners podium in 2021 we have 1. Deutsche Ärzteversicherung, 2. Entis, and 3. Nürnberger. They have the strongest starting position for high and stable future premiums for term and disability insurance. All of them having a Technical Net Rate larger than 2%. They stand out for their very strong technical returns and limited need to finance other traditional guarantee products. Strong insurers follow from 4th to 15th place with a Technical Net Rate larger than 1%. The strong insurers in particular have enough potential to pass on risk profits to customers undiminished – even in times of very low interest rates.back to Ranking Area