"Examining the essentiality of warranties reconsidered"
In a recent episode of the DAV video series #Extrapolates, Jürgen Bierbaum, board member of the German Actuarial Association (DAV), emphasized the importance of guarantees, particularly in the retirement phase.
Bierbaum underscored the need for a shift in understanding the role of guarantees in a zero-interest rate environment. He suggested that guarantees serve as loss limiters for poor capital market developments, providing a reliable safety net for basic needs in old age.
From an actuarial perspective, the guarantee level should not be too high to allow companies to diversify their capital investments profitably. This diversification is crucial in a low-interest rate environment.
The collective capital investment, organised by German life insurers and the institutions of occupational pension schemes (bAV), is highlighted as the best provider for the secure coverage of basic needs in old age. This long-term-oriented, collective capital investment is significant in securing retirement assets for retirement.
Bierbaum also called for a change in consumer thinking regarding the concept of guarantees. He noted that people want a reliable safety net for their basic needs in old age, and guarantees now are seen as a way to limit losses, rather than as a minimum expected return, as was previously the case.
However, Bierbaum did not specify a new perspective on the role of guarantees but emphasized their importance in the retirement phase. He also underscored the importance of guarantees in a zero-interest rate environment, highlighting their significance in a context where traditional investments may not yield sufficient returns.
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