FRANKFURT (dpa-AFX) - The first life insurers are sending a signal and putting an end to the years-long interest rate slump in the classic old-age provision product. According to industry experts, however, it will still take a while before life insurance policies across the board start yielding significantly more again, despite higher interest rates on the capital market. "The downward trend in current interest on private pension insurance policies should be over," expects Lars Heermann of the rating agency Assekurata. "However, the majority of life insurers are likely to keep the current interest rate stable for now and wait."

Assekurata expects a slight average increase in the current interest rate from guaranteed interest and surplus participation from the current 2 percent to around 2.10 percent in the coming year for classic private pension insurance policies. For newer life insurance products with a trimmed-down guarantee, which are now almost exclusively offered, it could be somewhat more. Heermann expects an increase from the current 2.05 percent to an average of about 2.20 percent. "That's not a huge jump, but it's at least a trend reversal after the declining interest rates of the past few years."

Industry leader Allianz Leben < DE000840400> is already raising current interest rates next year. Allianz Leben CEO Katja de la Viña spoke of a clear signal. R+V Lebensversicherung and Bayerische Lebensversicherung AG are also increasing their rates. Other insurance companies, including Alte Leipziger, Nürnberger Leben or Axa are not changing anything for 2023.

The current interest rate for classic life insurance policies consists of the guaranteed interest rate, which has been only 0.25 percent for new policies since the beginning of 2022 following a decision by the German Federal Ministry of Finance. Actuaries (German Actuarial Association, DAV) recommend that the so-called maximum actuarial interest rate remain at 0.25 percent in 2024.

"We are not just looking at this one year in which interest rates on the market have risen again, but are taking various factors into account," explained DAV Chairman Herbert Schneidemann. "The interest rate situation on the capital market must first stabilize at this level on a permanent basis before we can recommend a higher maximum actuarial interest rate."

Old contracts still yield up to four percent here. In addition, there is the surplus participation, which life insurers set anew each year for all contracts depending on the economic situation and the success of their investment strategy. The current interest rate refers only to the savings portion after deduction of acquisition and administration costs, among other things.

Consumer advocates have criticized the costs as too high for years. "Acquisition and sales costs are the largest cost block. Every time the guaranteed interest rate was lowered, we demanded that the first thing to go down was the costs," reports insurance expert Lars Gatschke from the Federation of German Consumer Organizations (vzbv). For the time being, he, too, does not expect to see any major increase in the interest paid on life insurance policies.

In his view, one reason is the capital buffer (additional interest reserve) that the insurance companies had to build up during the interest rate slump in order to fulfill the high promises of the past. "In order to build up the additional interest reserve, insurers sold their silverware, and now the books mainly contain low-interest fixed-income securities that hardly yield anything."

The rising interest rates on the capital market have also created so-called hidden burdens on the balance sheets of life insurers, which Heermann currently puts at around 50 billion euros. The companies do not have to reduce these. But the hidden burdens limit the flexibility of the insurers' investment strategy because they tie up capital. "I could imagine that the relief on the additional interest reserve will first be used to reduce hidden burdens."

According to his estimates, the capital buffer should be fully funded at the end of 2022, with almost 100 billion euros in total, thanks to the rise in interest rates. "This year, around 3 billion euros should be released from the additional interest reserve, and in the coming years it should be around 4 to 5 billion euros a year, provided interest rates on the capital market do not fall."

Heermann believes that the sharp rise in inflation will dampen demand for retirement products. "Life insurers will feel the issue of disposable income in new business." New business was already down in the second half of the year, he said. "Government relief measures such as the gas and electricity price brakes will not cause customers to buy life insurance in droves." The expert does not expect a wave of cancellations of current policies, "even if one or the other customer terminates his private retirement provision for financial reasons."/mar/DP/zb

--- By Friederike Marx, dpa ---