The head of the world's largest reinsurer, Munich Re
Chief Executive Nikolaus von Bomhard's remarks, made in an interview with the Financial Times, come at a critical juncture where Germany's economy appears to be returning toward pre-crisis levels while concerns of a faltering recovery are mounting in the United States.
We don't want the overall economy to stumble of course and if there is a risk that a recession might be caused by too abrupt a return to higher interest rates, then I would rather leave them where they are. But central banks should be starting to return to normal, he said in comments published on Saturday.
Low interest rates are a great source of refinancing for the banks, but for the insurers they are a real challenge, von Bomhard continued, adding that some accounting standards failed to show some customer guarantees and options that were increasing in value, increasing risks to their insurers.
If interest rates stay low for much longer, sooner or later things will get a little bit more difficult for some companies and you cannot see this in the accounts, the Munich Re CEO explained.
Central banks around the world slashed interest rates in response to the 2007-2008 global financial meltdown to stimulate economic activity. The European Central Bank's main rate is at 1 percent while the U.S. Federal Reserve keeps its rate effectively at zero.
Low interest rates reduce what insurers can earn from investments to meet payouts, but they also push up the assumed future cost of liabilities.
Munich Re competes most closely with Swiss Re
(Reporting by Christiaan Hetzner; editing by Keiron Henderson)