Insurance ‘a safe refuge in an uncertain world’ - BaFin president

Written by Adam Cadle

28/10/2019

Insurance “is a safe refuge in an uncertain world”, BaFin president Felix Hufeld has said.

Speaking on a panel at the French Insurance Federation's conference, Hufeld said “insurance as a safe refuge in an uncertain world means very simple things if you are an insurance company, it means keeping your promises”.

“If you take risk which is the very business of insurance, you have to be capable to keep your promise and that brings us back to one of the oldest concepts of insurance, solvency. If we take on long term risk, we have to be in a position to keep long term promises. If it is short term, it is much easier to calculate. So how do we do that in a world where interest bearing returns are approaching zero or even returning negative? The simple answer is you have to re-allocate portfolios of investments to streams of revenues which are not interest-bearing, which of course increases risk.”

Hufeld added that regulators are forcing the industry to increase its level of resilience.

“The good old basics of managing an insurance balance sheet is still as important as it was 10 years ago, or 50 years ago, or 150 years ago. If that has been screwed up, you can forget about everything else.”

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