Guaranteed interest rates for life insurance should remain stable

Capital investment

Guaranteed interest rates for life insurance should remain stable

On average, almost every resident of Germany has a life insurance policy in their drawer. The guaranteed interest rate has only gone downhill for over 20 years. Those times are over.

Interested parties can hope for stable guaranteed interest rates when taking out life insurance. The German Actuarial Association (DAV) recommends leaving the maximum interest rate unchanged at one percent for 2026. The association does not expect a return to the zero interest phase in the foreseeable future, which had pushed down the income of life insurers and the interest rates offered to customers. “We see in our models that a maximum technical interest rate of one percent can be kept stable in the medium term,” said DAV CEO Maximilian Happacher to the German Press Agency. “That is why we are recommending to the Federal Ministry of Finance to do nothing, i.e. to leave the maximum interest rate unchanged at one percent.”

Actuaries are highly specialized actuaries. The maximum technical interest rate – the technical term for the guaranteed interest rate – is set by the Federal Ministry of Finance, based on the recommendations of the actuarial association and the financial regulator Bafin. The determination applies to new contracts. The procedure is intended to prevent insurers from making excessive interest rate promises in the fight for customers.

Life insurance is still one of the most popular forms of investment – or private retirement provision – in Germany: According to figures from the General Association of Insurers, the population had taken out a total of 81.4 million policies in 2023, which is almost the same as the population of the Federal Republic. However, the guaranteed interest rates had fallen steadily over many years, and the number of contracts fell accordingly in the zero interest phase.

“In 2025 there will be the first increase in the maximum interest rate in 30 years,” said Happacher. “The last time the maximum interest rate was increased was in 1994, from 3.5 to 4 percent.” Since 2000, the maximum interest rate has only been reduced. The rise in interest rates since 2022 also means better times for life insurance customers. “The total interest rate – i.e. guaranteed interest plus profit participation – has increased significantly again in recent years,” said Happacher, who is a full-time board member of the foreign division at Düsseldorfer Ergo-Versicherung. “Life insurers have a good earnings situation, which they pass on to customers.”