World’s Largest Reinsurer Buying Gold To Counter Punishing Negative Rates
By Mark O’Byrne
GoldCore.com
March 16, 2016
The world’s largest reinsurer, German reinsurer Munich Re is boosting its gold reserves and buying gold in the face of the punishing negative interest rates from the European Central Bank, it announced today.
As reported by Thomson Reuters this afternoon:
German reinsurer Munich Re is boosting its gold and cash reserves in the face of the punishing negative interest rates from the European Central Bank, it said on Wednesday.
The world’s largest reinsurer is far from alone in seeking alternative investment strategies to counter the near-zero or negative interest rates that reduce the income insurers require to pay out on policies.
Munich Re has held gold in its coffers for some time and recently added a cash sum in the two-digit million euros, Chief Executive Nikolaus von Bomhard told a news conference.
“We are just trying it out, but you can see how serious the situation is,” von Bomhard said.
The ECB last week cut its main interest rate to zero and dropped the rate on its deposit facility to -0.4 percent from -0.3 percent, increasing the amount banks are charged to deposit funds with the central bank.
ECB policy has caused financial market interest rates to fall, reducing the return that insurance companies can earn from investments in bonds, hurting profit and raising concerns about their ability to meet future promises to policyholders.
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