The most complex period for life insurers came with the rapid rise—and then the decline—of interest rates following years of zero or even negative rates across the entire yield curve,” said Marc Hengen, managing director of the professional association of Luxembourg insurers and reinsurers (Aca).
Guarantees still matter in a low-rate environment
During the prolonged low-rate environment, life insurance products continued to offer guaranteed rates, which in Luxembourg are capped—often at zero. “Guaranteeing capital in a negative rate context was already considered a significant commitment,” Hengen said.
Nevertheless, he observed that the product mix gradually shifted towards unit-linked solutions, which offer greater growth potential than traditional products with guaranteed rates. Some insurers also withdrew products offering fully guaranteed returns, reflecting the challenges of sustaining such guarantees.
Shifting balances
According to Hengen, the sharp interest rate movements of recent years have forced insurers to rethink both their strategies and product offerings.
Hybrid products—mixing unit-linked and guaranteed-rate elements—allow clients to combine both approaches.
The most complex situation for insurers was the rapid increase in interest rates after covid,” he said. Coming from an era of zero or negative rates, the sudden surge left insurers with little room to manoeuvre. Guaranteed-rate products, long valued for their stability, quickly became less attractive compared with short-term deposits.
To adapt, insurers have placed greater emphasis on flexibility and diversification. “Hybrid products—mixing unit-linked and guaranteed-rate elements—allow clients to combine both approaches,” Hengen noted.
Looking ahead, he expects market-linked products to dominate if equity markets stay strong. "In volatile markets, guaranteed options remain popular," he said, though for now, investors are increasingly turning to unit-linked solutions.
A modified version of this article was written for the January 2026 insurance supplement of Paperjam magazine, published on 10 December. The content is produced exclusively for the magazine. It is published on the site to contribute to Paperjam’s comprehensive archive. Click this link to subscribe to the magazine.
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