The current low interest rate environment poses a significant risk for the long-term financial viability of pension funds and insurance companies, as they seek to generate sufficient returns to meet promises, according to a new OECD report.
The inaugural edition of the OECD Business and Finance Outlook says the main concern is that pension funds and life insurance companies might become involved in the “search for yield” in order to match the levels of returns promised to policyholders and beneficiaries when interest rate were higher. This poses risks including insolvency.
“Generating the resources needed to confront the challenge of ageing populations will require a better global allocation of resources to the most productive investments but without excessive risk-taking,” said OECD Secretary-General Angel Gurría launching the report in Paris (watch the live webcast).
