German life insurers can limit payment of capital gains, Supreme Court rules

Tuesday, 10 July 2018 00:31 -     - {{hitsCtrl.values.hits}}

KARLSRUHE, Germany (Reuters): German life insurers can limit payments of capital gains to their customers, the nation’s Supreme Court has ruled.

The decision is a win for insurers, who have been struggling to pay life insurance policies in an era of historically low interest rates.

The decision reaffirms the validity of a change in a 2014 law that gave insurers the right to pay out less.

Last Wednesday’s case originated with a consumer group, the German Association of the Insured, which argued that the 2014 law was unconstitutional and sued on behalf of a customer of Victoria Lebensversicherung, a unit of Munich Re’s Ergo.

Insurance lobby German Insurance Association (GDV) had pushed for the law change, arguing that a previous system of paying out capital gains to customers who prematurely ended their policies benefited only a few while harming the industry at large.

The court ruled that life insurers must justify the reduced payments by showing that they otherwise would not be able to fulfil their obligations.