Article / 20 May 2016 at 14:00 GMT

German insurers poised to enter the stock market

  • German national health insurers may buy shares as pension investment
  • Limitations in new law are strict
  • Insurers want to invest even more on the stock market
  • Low interest rates making their daily life difficult
By Clemens Bomsdorf

Berlin is beautiful, but the outlook for Germany's national health insurers 
is challenging due to low interest rates. Photo: iStock 

German shares, recently under pressure again, could see increasing demand from institutional investors if a new law is put in place. The proposed law suggests that national health insurers –Gesetzliche Krankenkassen in German – should be allowed to invest part of their financial reserves in equities. Currently they are losing millions of euros because of the low interest rate environment with partly negative rates.

According to media reports, the new law comes with strict limitations. It would be possible to invest only up to 10 % of the reserves meant to co-finance their own employees’ pensions. However, the insurers have only started to build said reserves yp couple of years ago and are meant to keep on doing so until 2049. Hence, the current sum of roughly €5 billion is set to be increased heavily.

Germany's Dax since the end of March this year:
Dax 8 hr chart
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Source: Saxo Bank

Also, insurers are very limited when it comes to the equities they can invest in. Only euro-denominated shares are allowed; also, management should be passive and oriented towards indices. Insurers say that the quota should be much higher, up to 30%.

For some years insurers have been obliged to build up their employee pension-financing reserves, but the assumed interest rate of 4.25% can not currently be reached given the strict limitation on fixed income. It is due to this that some, acting in a grey zone, have already invested in equities.

Challenges can be found elsewhere as well. When it comes, for example, to insurance-based company pension funds, regulator BaFin estimates that these need to achieve an average annual return of about 3.28% to meet their long-term commitments, whereas new German government bonds are currently yielding annual returns of only 0.14%, Handelsblatt reports

— Edited by Michael McKenna

Clemens Bomsdorf is a consulting editor at


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