Low interest rates fore er… nterest rates remain very low ater the ter the inancial crisis‰ maŠor central bans ept policy rates at close to §ero or inancial crisis… about seven years to support economic recovery and put upward pressure on prices… n this context‰ the conse«uences o the interest rate hie by the ‹„ ¥ed in ­ecember 201 and the direction o longŽterm interest rates raise ey «uestions or insurers… This is because income rom inancial assets is an important part o earnings‰ although not all lines o business are aected to the same degree… Œill interest rates inally rise and go bac to preŽcrisis levels¬ eneva ˜eport inds that longŽterm ­uring the last three decades‰ yields or 10Žyear government bonds have decreased government bond yields have allen or steadily… ‘owever‰ inlation expectations‰ calculated by the dierence in yields rom three decades‰ but inlation expectations inlationŽprotected and unprotected bonds‰ remained relatively stable‰ relecting the have remained stable… credibility o central bans’ inlation targets… recently published eneva ˜eport on the world economy thereore associates the all in yields during the last two decades with lower real interest rates‰ rather than with a decline in inlation expectations… ¢ther actors could be at play in the The inancial crisis and the subse«uent reaction o central bans caused Šust a small longŽterm downtrend in interest rates… dip in the longŽterm down trend o real interest rates… ‘ence‰ other drivers need to be at wor… The eneva report ocuses on dierent explanations“ ̤ n ageing population in most parts o the world led to an increase in the aggregate propensity to save‰ some o which went into ixed income assets‰ lowering real interest rates… ̤ nother contributing actor has been the increase in savings in —hina… The higher savings coupled with —hina’s increased inancial integration‰ led to large capital outlows into global inancial marets… ̤ shit in investor preerences away rom risy assets towards sae bonds is another liely driver or lowering real interest rates… ccording to the report‰ interest rates These actors may persist or some time‰ and re/insurers need to be prepared to could eventually rise again… cope with low interest rates or a while yet… ‘owever‰ the report also mentions that with time‰ interest rates could increase as the causes o the downward trend reverse“ ̤ ¥irst‰ aggregate savings levels could decrease as the cohort o current savers continues to move towards retirementŸ ̤ „econd‰ with the shit in —hina rom investment and exportled growth to a more consumptionŽdriven economy‰ the —hinese outlow o capital into global inancial marets may also stabiliseŸ and ̤ ¥inally‰ a gradual return o investors into more risy assets could alleviate pressure on interest rates… 5 Low for Long? Causes and Consequences of Persistently Low Interest Rates, ¢ctober 201‰ nternational —enter or ‚onetary and ¦aning „tudies †—‚¦‡ and —entre or Economic €olicy ˜esearch †—E€˜‡… Swiss Re sigma No 3/2016 ƒ