"Exploring the idea of warranties' relevance"

In a recent episode of the DAV video series #Extrapolates, Jürgen Bierbaum, board member of the German Actuarial Association (DAV), emphasized the significance of guarantees in a zero-interest rate environment, particularly during the retirement phase.

The collective capital investment approach, a key strategy for German life insurers and institutions of occupational pension provision (bAV), is not limited to a specific industry or financial product. This approach aims to provide a safety net for old age, not just a minimum expected return.

According to Bierbaum, the goal is to ensure a reliable and lifelong income for securing basic needs in old age. In a zero-interest rate environment, guarantees serve as loss limiters in case of poor capital market developments.

Until now, guarantees have often been understood as a minimum expected return. However, Bierbaum emphasized a need for a change in consumer thinking regarding the concept of guarantees. Instead, the role of guarantees in a zero-interest rate environment is to limit losses in case of poor capital market developments.

Companies need to diversify their capital investments profitably to fulfill the role of guarantees as a lower limit. From an actuarial perspective, the guarantee level should not be too high to allow for profitable capital investment diversification.

The German institutions important for occupational accident insurance pension (Berufsgenossenschaftliche Altersvorsorge) that exemplify long-term, collective capital investment for securing retirement, as referenced by Mr. Bierbaum, primarily include the various Berufsgenossenschaften (professional association accident insurance institutions) such as BG ETEM, BG BAU, and VBG. These institutions collectively manage long-term pension provisions through collective capital investments to secure retirement benefits for insured workers.

Bierbaum also highlighted the importance of guarantees in a zero-interest rate environment. He stated that the safety net for old age can be best provided by a long-term oriented, collective capital investment. Guarantees in a zero-interest rate environment no longer serve as a sensible or up-to-date minimum expected return.

In conclusion, the collective capital investment approach is a strategic response to the challenges of a zero-interest rate environment, aiming to secure a reliable income for retirees while allowing for profitable capital investment diversification.