Maximum Technical Interest Rates in Life Insurance in Europe and the United States: An Overview and Comparison

Item Type Journal paper
Abstract

We compare the regulatory environment for the maximum technical interest rate of life insurance contracts in four European countries and the United States. In Germany, Austria and Switzerland, the maximum rate is driven by a long-term rolling average of government bond yields and is adjusted by the regulator. In the U.S., corporate bond yields are used and the regulator is not directly involved in setting the maximum rate. The regime implemented in the United Kingdom is unique: instead of a rules-based "one-size-fits-all" approach, the maximum rate is determined by a company-specific principle-based method. We provide a comparative analysis of the different systems and conduct a numerical analysis to investigate how the maximum rate will develop under predefined interest rate scenarios. The discussion is highly relevant in light of Solvency II, a regime that may fundamentally change regulation of the maximum technical interest rate.

Authors Eling, Martin & Holder, Stefan
Journal or Publication Title The Geneva Papers on Risk and Insurance - Issues and Practice
Language English
Keywords life insurance; insurance regulation; interest rates; scenario analysis
Subjects business studies
HSG Classification contribution to scientific community
Refereed Yes
Date 10 October 2012
Publisher Palgrave Macmillan
Place of Publication Basingstoke
Volume 38
Number 2
Page Range 354-375
Number of Pages 22
ISSN 1018-5895
ISSN-Digital 2311-0112
Publisher DOI 10.1057/gpp.2012.41
Depositing User Prof. Dr. Martin Eling
Date Deposited 05 Feb 2013 16:45
Last Modified 31 Oct 2018 08:41
URI: https://www.alexandria.unisg.ch/publications/220312

Download

[img] Text
Maximum Technical Interest Rates in Life Insurance in Europe and the United States An Overview and Comparison.pdf

Download (369kB)

Citation

Eling, Martin & Holder, Stefan (2012) Maximum Technical Interest Rates in Life Insurance in Europe and the United States: An Overview and Comparison. The Geneva Papers on Risk and Insurance - Issues and Practice, 38 (2). 354-375. ISSN 1018-5895

Statistics

https://www.alexandria.unisg.ch/id/eprint/220312
Edit item Edit item
Feedback?