Impact of changes in interest rates tot he

insurance sector:
Investopedia:

Insurance companies have substantial investments in interest-ratesensitive assets, such as bonds, as well as market interest ratesensitive products for their customers

Drops in interest rates can decrease an insurance company's

liabilities by decreasing its future obligations to policyholders

lower interest rates can also make the insurance company's

products less attractive, resulting in lower sales and, thus, lower
income in the form of premiums that the insurance company has
available to invest

The net impact on the company's profitability is determined by

whether the decrease in liabilities is greater or less than any
reduction in assets that is experienced.

lower interest rates can also negatively impact an insurance

company's risk profile as an equity investment if analysts believe the
company may have difficulty meeting future financial obligations
Lower levels of equity investment mean lower levels of assets for
insurers.

http://www.investopedia.com/ask/answers/061515/how-much-dochanges-interest-rates-affect-profitability-insurance-sector.asp

ECB:

Current low interest rate environment constitutes the main risk for
the European insurance industry. This is mainly due to two generic
characteristics of insurers business models: (i) the large amount
of fixed-term investments that insurers have on their
balance sheet; and (ii) the strong influence of long-term
interest rates on the discount rate of insurance liabilities

Life insurance business is often characterised by the presence of

products embedding financial guarantees, i.e. instruments
granting a minimum rate of return to policyholders.

The underwriting of insurance policies constitutes the core activity of

any particular company, and the investment strategy is
subordinated to underwriting needs, typically in the form of assetliability management or matching techniques difficult to have a
clear picture of the final impact of low (long-term) interest
rates, and this impact may, in any case, differ substantially
across insurance companies and countries.

 high exposure to long-term fixed income assets investment income

will suffer as the net cash flow from paid premiums and maturing
investments needs to be gradually re-invested at lower rates.
Average duration of gov bonds on BS of insurers: 8,6 years (2013)
Small and medium-sized, non- diversified life insurers are typically more exposed,
in particular if they have sold policies with high levels of guarantees.

Balance sheet effects:

via a valuation effect, as low rates induce increases in the values of both
assets and liabilities

A market-consistent valuation of assets and liabilities typically results in higher

increases in the value of the latter when long-term yields decline because the
magnitude of the assets invested in fixed-term instruments is a fraction of the
total liabilities

Durationofliabilitiesisoftenlongerthanthanthatoftheassets
alowyieldenvironmentcanaffectthesolvencyoftheinsurersdirectlyandimmediately
throughthebalancesheetchannel
insurerswithlargedurationmismatchesbeingthemostvulnerabletothischannel.

Most importantly, the impact will depend on the valuation rules currently in
place, which differ across jurisdictions

https://www.ecb.europa.eu/pub/fsr/shared/pdf/sfbfinancialstabilityreview201511.en.pdf?
91546a7d227fbdde7d42aa5ac0779f4b

Allianz/ECB:

TheGermanInsurance Association estimates a current blended new

investment yield of 1.79% for 18yrs and 1.39% for 12 years down
from 3.5% and 3.0% respectively in Jan 2014. Business plans in
the industry have not been build on the basis of zero real returns.

Risk that investment yields fall below guarantees for life insurers
causing losses and decline in capital.

ZZR buffer in Germany cost insurers ca EUR 20bn in 2014/15. sustained low
interest rates increases requirement for future years. Some estimates for 2024
accumulated ZZR requirement exceed EUR 100bn.

P&C companies are less affected. Low rates will reduce profits but
P&C companies can often raise premium as many products reprice
annually

https://www.ecb.europa.eu/paym/groups/pdf/bmcg/160407/2016-0407_Item_2_2_Impact_of_low_or_negative_interest_ratesinvestor_perspective.pdf?396622b044951786262c3308b9da7867

Development of interest rates after crisis

Impact on insurance
o Balance Sheet
o Investment opportunities

Impact on Allianz

Impact on Axa