| Abstract: | The article focuses on two questions related to the financial supervision of German life insurers. German insurers are not allowed to invest more than 30% (35 % from Jan. 1st, 2002) of their assets covering the technical provisions in stocks. First, it has been elaborated that this fixed limitation of stock investments is inconsistent with a risk-related asset allocation. Life insurers should observe the recognitions of the capital market theory as do all other investors. Basically, fixed liabilities have to be covered safely, i. e. with bonds. Not withstanding this, fixed liabilities may be covered with stocks if the losses which may occur due to the volatility of the capital markets can be equalized through the dissolution of hidden reserves (which is a phenomenon arising from the German accounting standards). Since the hidden reserves differ from insurer to insurer the regulation of stock investments is recommended to be carried out individually. The British solution has been introduced as an example for an individual regulation of the stock / bond-ratio. Secondly, the differentiation between the German technical provisions and free assets is also partly inconsistent with a risk-related asset allocation. The free assets cover liabilities to the amount of the terminal bonus reserve, which have to be covered safely with bonds. Nevertheless, even today a with-bonus life insurance contract investing more in stocks than in bonds can be offered. In this case, fixed liabilities should be prevented by a low guaranteed interest rate and a high and variable terminal bonus. |
