Central bankers are unfairly penalising the insurance and reinsurance sectors through their policy of keeping interest rates at historic lows, according to the chief executive of France’s Scor, the world’s fifth-largest reinsurer.
Addressing a conference in London, Denis Kessler said that the industries are a “collateral victim” of the policy by the European Central Bank (EBC), Bank of England (BoE) and US Federal Reserve. “Enough is enough,” added.
“My message to Mr Carney, Mr Draghi and Mrs Yellen is please stop ruining the reinsurance [and insurance] industry. We are the collateral victims of the monetary policy which has been designed to help governments and banks after the financial crisis. We were not at the heart of the crisis nor did we create this crisis.”
Companies operating in both sectors report that low interest rates have depressed the returns from fixed income assets that dominate their investment portfolios, which have traditionally contributed significantly to their profits in addition to prudent underwriting.
Reinsurers also claim that their ability to increase premiums is increasingly undermined by investors seeking improved yields, many of whom have moved into the reinsurance market in recent years and created demand for instruments such as catastrophe bonds.
Several insurance executives have cited both the pressure that low interest rates are applying to their business models and also an increasing regulatory burden following the financial crisis. However, the industry has tended to be reluctant to criticise central bankers.