European Insurers’ Dividend Growth Unlikely
Wednesday, 05 13 2015, Category: Insurance and Reinsurance, Country: Europe
Expectations of rising dividends and share buybacks from Europe’s insurance companies are fading as ultra low interest rates make it harder for them to meet new capital regulations.
Rock-bottom interest rates reduce insurers’ investment returns, raising the risk of them having to eat into capital reserves to pay policyholders.
With yields on some government bonds — staple investments for insurers — turning negative recently, the International Monetary Fund (IMF) warned last month of a “high and rising” danger to weaker mid-sized European life insurers.
Calling for urgent action to tackle the issue, it cited 2014 data from the European insurance regulator showing 24 percent of the region’s insurers may not be able to meet new minimum capital requirements if interest rates remain low for a protracted period of time.
Source: Insurance Journal