Allianz CEO on low interest rates and M&A: Financial Times

In the current market, insurers need to be able to price risks very well

When interest rates drop, capital flows into reinsurance and then primary insurance, and pressure on premiums goes up. Insurers “need to be able to price risks really, really well,” Allianz CEO Olive Bate told the Financial Times. “You have to have very high efficiency that your profitability is better than your neighbour’s and you have to have the financial standing power to go through the cycle.”

Low rates can also force “many people with fixed liabilities to take on risks, and more and more risks over time,” he says. “And then asset bubbles build, particularly as we see it now in credit markets, that eventually have to burst.”

It can also drive M&A activity and while Bate won’t comment on other companies’ investment decisions, he suggests “buying something just to get bigger” isn’t a sound choice.

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Transcontinental Media G.P.