ECB strategy review should include plan to exit loose monetary policy measures - Insurance Europe

Written by Adam Cadle

02/09/2020

Insurance Europe is calling for the European Cental Bank's (ECB) strategy review to include a plan to exit loose monetary policy measures as quickly as possible.

In its response to a consultation by the ECB on its ongoing startegy review, Insurance Europe said: "Interest rates are very significant for the insurance industry: they impact product offering, as well as the measurement of insurers’ balance sheet positions and, more broadly, their solvency ratios.

"The insurance sector agrees that a loose monetary policy was an appropriate reaction to the global financial crisis, as well as to the eurozone debt crisis. With the COVID-19 pandemic severely affecting the economy, responses also need to be timely, targeted and strong. However, they must be temporary. Market participants and governments should know that central bank support can only be temporary."

The European insurance industry also noted that the ECB should assess "more thoroughly the impact of its policies regarding interest rate levels and asset purchase programmes on long-term consumer savings and pensions".

"Persisting inflation at moderate levels and negative interest rates, as well as ever changing and at times unnecessarily rigid regulation, results in massive redistribution effects at the expense of traditional savers," it added.

Furthermore, the industry said the review of Solvency II must result in "meaningful improvements" given that the ECB’s low interest rate policy "amplifies problems already identified with the framework and the barriers that those problems create for insurers providing long-term products and long-term investment".

Related Articles