German life insurers have always feared a discussion.

What would happen to your product if nominal interest rates remained in the basement, but the inflation rate soared?

This situation is uncomfortable because the real interest rate then becomes negative for consumers and they lose money on their retirement savings.

For years they were able to bypass this discussion because, in addition to the low interest rates, there was also low inflation and the loss of nominal premium yields did not seem quite as bad in comparison either.

Philipp Krohn

Editor in business, responsible for “People and Business”.

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Now it's different.

With inflation of more than 5 percent recently, the calculation of retirement savers changes.

This is why life insurers are trying not to adjust the current interest rate that they can credit their customers too much to the ongoing challenging interest rate situation.

The market leader Allianz announced on Monday that it would keep its profit participation constant compared to the previous year.

The Stuttgart-based market leader, based in Stuttgart, has an interest rate of 2.3 percent for classic policies that are no longer sold in new business.

In the product perspective, which only stipulates the contractual terms until the retirement phase, the figure is 2.4 percent.

From the management's point of view, this is a compromise between an attractive offer and financial stability.

Allianz claims that it will have enough money in the long term

In scenarios up to the years 2050 and 2080, Allianz Leben has extrapolated the financial requirements.

"The guaranteed minimum performance in the portfolio is covered by the current income in all years," says Product Director Volker Priebe.

In the next six decades, the life insurer could distribute 100 billion over and above the promised guarantees as a bonus to customers.

With the help of the additional interest reserve required by the supervisory authority, she has reduced the average guarantee in the portfolio to 1.4 percent, and by 2024 it will be reduced to 0.9 percent.

That can be achieved well even under difficult capital market conditions.

Competitors have also noticed self-confident statements in the past few days. Ideal from Berlin, which is still very faithful to classic life insurance with guaranteed interest and has benefited from the real estate boom in the capital, has set its current interest rate to 3 percent for the second time. Swiss Life from Munich declared a profit participation of 2.25 percent for the seventh time in a row. The Nuremberg and LV 1871 also kept their declarations constant at 2.25 and 2.4 percent. Only the old Leipzig lower the average. It has reduced the interest rate from 2.35 to 2.1 percent.

"Since interest rates are still low, there will be no increases in interest rates, rather slight reductions," says Reiner Will, managing director of the rating agency Assekurata.

But he no longer expects the big leaps down in recent years.

“For annuity policies, we had an average of 2.13 percent last year.

We can still see a 2 before the decimal point. ”Classic contracts hardly played a role in new business anymore.

In this respect, the comparison of the nominal interest rates is also less relevant.

But even for almost all modern policies, the cover pool with surplus participation continues to be the engine for the return to the customer.

Contracts with a reduced guarantee have reached the customers

A large part of new business at Allianz was made up of contracts with a reduced guarantee. Management boards of insurers had repeatedly stated in the past few years that this would be impossible due to the preference of customers for security. "We are pleased how the changes from the past are being understood by our customers," says Allianz Leben Board Member Priebe. "This also opens up scope for capital investments for the entire collective."

Furthermore, the investment in these policies works according to the logic of classic life insurance with security assets (cover pool).

But since such an extensive mandatory guarantee is no longer agreed, more money can be invested in more promising stocks.

At Allianz, half of the collective assets are invested in this way, one third of the capital investment is in non-exchange-traded stocks that private customers would not be able to easily access.

Assekurata managing director Will welcomes this approach, but calls on the providers to allow customers more insight.

“You just have to make that more transparent for the customer,” he says.

No consumer can have calculated what his share in the collective is.

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