FRANKFURT, Sept 7 (Reuters) - Munich Re insurance unit Ergo will discontinue writing new life insurance products with guaranteed interest rates at the end of this year, an Ergo board member said.
Life insurance savings policies with guaranteed interest rates of up to 4 percent were popular in Germany for years but insurers have found their margins increasingly squeezed by rock bottom interest rates, even as they progressively lowered the guaranteed rate on offer.
“We will largely wind down new business with classical products at the end of the year,” Clemens Muth told Sueddeutsche Zeitung, adding that the products were not profitable for Ergo.
German insurers have been shifting toward savings policies tied to developments in the capital markets, which are also less burdensome under the new Solvency II risk capital rules that take effect in 2016.
Insurers Talanx, Axa, Generali and Zurich Insurance have already announced similar moves to Ergo for German guaranteed savings products.
Market leader Allianz Leben continues to offer both guaranteed and capital-market oriented products but expects increasing customer interest in the latter.
Reporting by Jonathan Gould, editing by Louise Heavens