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![]( "Buchcover ISBN 9783957291486")
Lethal lapses
how a positive interest rate shock might stress German life insurers
von Mark Feodoria und Till FörstemannLife insurers typically grant policyholders a surrender option. We demonstrate that
the resulting lapse risk could materialise in the form of a \policyholder run" if
interest rates were to increase sharply. An inverse stress test based on a unique
set of regulatory panel data suggests that German life insurers have become less
resistant to an upward interest rate shock in the course of the nancial and sovereign
debt crisis from 2007 to 2011. Despite the challenges presented by the low-interestrate
environment, the situation has not deteriorated since then. In light of the
quantitative easing (QE) of monetary policy in the euro area, life insurers may nd
it dicult to continue this positive trend.
the resulting lapse risk could materialise in the form of a \policyholder run" if
interest rates were to increase sharply. An inverse stress test based on a unique
set of regulatory panel data suggests that German life insurers have become less
resistant to an upward interest rate shock in the course of the nancial and sovereign
debt crisis from 2007 to 2011. Despite the challenges presented by the low-interestrate
environment, the situation has not deteriorated since then. In light of the
quantitative easing (QE) of monetary policy in the euro area, life insurers may nd
it dicult to continue this positive trend.