Inflation concerns rather than low interest rates

DThe term turning point has perhaps been used in an inflationary way in recent weeks. And perhaps with a view to the financial market it is also possible to go one size smaller. But it is at least a paradigm shift when the dominant headline of recent years suddenly shifts from zero interest rates to inflation.

For insurance companies, the period after the 2008 financial crisis was an historic challenge. With interest rates steadily falling, they had yet to generate enough investment income to meet their nominal interest rate promises. Some life insurers have lost patience and have sold their holdings to international investors looking to turn policy settlement into a lucrative business.

The rise in prices is not inconvenient for them at first, because it is accompanied by a return in interest rates. But there is a lot of uncertainty: How long will consumers keep their life insurance policies if surpluses remain permanently below the rate of inflation?

A survey by investment bank Goldman Sachs shows that inflation has become a real concern for insurers. They seek their salvation in equity holdings and green bonds. But the market is tighter than the demand for attractive parking spaces for the pension plan money. The paradigm shift does not mean that it is getting easier for investors in the industry.


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