The Effects Of Negative Interest Rates On The Life Insurance Financials

Extremely low or negative interest yields of fixed-income securities present significant hazards for life insurance firms. To address stringent regulations, life insurance firms invest a significant proportion of the security premiums in interest-bearing long-term debt instruments. The authors of this study discuss the adverse effects of negative interest rates for a hypothetical insurance firm and provide calculations to show how the premiums on life insurance products and policy reserves may be changed to mitigate the effects of negative interest rates.