ECB Decision to Extend Quantitative Easing Hits European Insurers’ Shares

By Carolynn Look | December 4, 2015

Shares of European insurers fell after the European Central Bank decided to extend its quantitative easing program until at least March 2017 and broaden the range of assets purchased.

The decision is “disappointing” because bond purchases by the ECB will mean insurers have to buy riskier assets to make a return, Immo Querner, chief financial officer at Talanx AG, Germany’s third-biggest insurer, said in an e-mail. The Stoxx 600’s index of insurance shares fell 3.2 percent on Thursday, the most since Aug. 24.

“With every further step, the false incentives that the ECB has been setting ever since the launch of the bond-buying program become ever greater,” Querner said. “In the case of many liability-driven investors, such as insurers, this increases the danger of disproportionate risk taking, a danger that the ECB is apparently choosing to ignore.”

Talanx shares dropped 2.8 percent in Frankfurt trading.

Insurers in the region face a prolonged period of low interest rates which could have “material implications for the profitability and the solvency of many insurers,” the ECB said in a Nov. 25 report. Some insurers are taking on more risk as a result, the report said.

Topics Carriers Europe

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