The European Union's insurance regulator has called on member states to take a co-ordinated approach to address the damage that persistently low interest rates are causing to the insurance industry.

The European Insurance and Occupational Pensions Authority also committed to taking steps itself to alleviate the impact of low rates, which it said were already affecting the industry in several member states.
In an opinion note issued yesterday, EIOPA explained that both the life and non-life insurance sectors were affected by the issue, which impacts on asset and liability values. In terms of liabilities, persistent low rates mean life insurers' long-term obligations to their policyholders become more expensive in today's terms, while on the assets side they have a negative impact on insurers' investment results and increase the re-investment risk of assets.
EIOPA noted that low rates, and resulting lower investment returns, also reduce the margin available to short-term insurers who are using these returns to compensate for weak underwriting results.
The Bank of England's base rate has been stuck at 0.5% since March 2009, while the European Central Bank's fixed rate has been at a record low of 0.75% since July 2011.
The regulator said national supervisory authorities should - if they hadn't already - 'actively assess' for their insurance industry exactly what the risks arising from low interest rates are, paying special attention to insurers identified as facing greater exposure.
Supervisors should also engage with insurers to explore the measures that companies can take to address the impact of persistently low interest rates. 'In particular, national supervisory authorities would actively challenge business models that are identified as being unsustainable and to encourage insurers to take appropriate actions,' the note said.
They should also explore ways to 'de-risk' new insurance business and also improve the financial resilience of existing business.
EIOPA is calling on national regulators to report, preferably on a half yearly basis, on progress in these areas and to also take part in a 'co-ordinated stock take' it plans to run next year.
For its part, EIOPA will work with national regulators to develop an agreed framework for assessing the 'scope and scale' of risks posed by a prolonged low interest rate environment and then co-ordinate the regulators' work on this process.
Gabriel Bernardino, chair of EIOPA, said: 'The economic environment shows us that joint actions against long-lasting interest rates environment are crucial. By co-ordinating these actions EIOPA is committed to ensure a consistent supervisory approach and a fair and equitable treatment to policyholders.
'Private sector solutions are fundamental but they cannot take advantage of the information asymmetry and must be designed in a way that does not mislead policyholders,'
In its note, EIOPA noted that the low interest rate environment was also having an impact on workplace pension funds, an area it plans to explore 'more fully' during the course of the year.