Rate Concerns

premium

As Retirees Cash Out and Interest Rates Remain Low, Munich Re CEO Sees Seeds of Next Financial Crisis

  • Why it matters

    Why it matters

    The head of Munich Re said continued low interest rate fiscal policies and growing pension commitments may lead to the next financial crisis.

  • Facts

    Facts

    • Nikolaus von Bomhard, the Munich Re CEO, calls the surplus of capital in the market “breathtaking” with the Euro prime interbank lending rate at 0.15 percent.
    • Insurers are wary of investing in stocks, but are deeply interested in infrastructure investments.
    • Mr. Von Bomhard blasted the political maneuvering surrounding attempts to reform Germany’s generous pension system.
  • Audio

    Audio

  • Pdf

 

Munich Re Hauptversammlung
Munich Re Chief Executive Nikolaus von Bomhard warned that continued low-interest-rate fiscal policies and an aging public cashing out their retirement packages could translate into the next global financial crisis. Source: DPA

 

It was a pleasant summer evening when Nikolaus von Bomhard, chief executive officer of the Munich reassurance group Munich RE, invited journalists to meet in the company’s lush garden, but the picture painted by the chairman of the world’s largest reassurance group was exceedingly bleak.

Calling liquidity in the markets “breathtaking,” Mr. von Bomhard said, “Monetary and financial policy weapons are currently losing their impact.”

Munich RE has never been shy about its opposition to low interest economic policies, he said, but there is a point where the disadvantages are greater than the benefits. “We are close to this point in Europe,” he said.

The European Central Bank lowered its prime rate in June to an all-time low of 0.15 percent. The bank’s remedial measures are controversial, especially in the insurance industry. Insurers are looking to invest billions on behalf of their customers, but they see few lucrative investment opportunities, while the low interest policy has meant tangible losses for German savers.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.