Insurer Survivability: (More) Unintended Consequences Of ZIRP And NIRP!


For potential property buyers and current owners of property who are thinking of refinancing a mortgage, ZIRP has been, and NIRP may someday be, fantasticmonetary policies!

ZIRPNIRP? For those unfamiliar these acronyms are not the sounds an infant might make but instead are deadly serious policies that are being used by central bankers around the world in an attempt to re-ignite the fortunes of economies that are either stagnating or in full-blown recession.

To date these seers of monetary policy have been marginally successful at best in achieving their stated mandates although, in a much debated move (based on the actual strength of the U.S. economy and the rate of inflation), the Federal Reserve has recently raised the fed funds rate by .0025%.

Getting back to the crux of the story NIRP is a negative interest rate policy (never implemented in the U.S.) and ZIRP zero percent interest rates that have been engineered through policies in the U.S. known by the terms quantitative easing, QE1, QE2, QE3, etc.

And while this style of monetary policy has been a boon for stock market investors, homebuyers, real estate investors and mortgage refinancers, for savers and for those living on fixed income investments it has been an unmitigated disaster!

…while stock market investors have benefited greatly by playing in the ‘only game in town’ within a 0% rate environment, savers and retirees have been slammed by the almost nonexistent returns on their money. That, or they have been forced to take on more risk to reach for that return…‘ (Source)

But Are There More Potential Unintended Consequences Of Central Bank Policies?

From Mish Talk, one of my favorite bloggers who deciphers all things economic, a look at the potentially deadly business effect that monetary policy could have on insurance companies ability to pay!

Or worse (just as bad?), the potential for an unexpected increase in premiums that may be required to keep a policy current placed on the backs of a demographic with the least ability to pay and, who were likely never told that such a possibility existed!

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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