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Lower interest rates to pose challenge to insurers, says PHL firm


BANGKOK, Thailand —With the global trend of easing interest rates, a Philippine insurance company said "difficult times" are expected given the lower yields.

In an interview with Troo chief operating and chief technology officer Hans van Wuijckhuisje, the reduction of key interest rates will be challenging for the industry in general.

"It will make our life as insurer more difficult. Lower interest rates are always difficult for insurers, cause our investments will have lower yields, so we can promise and do less for our customers," he told GMA News Online in an interview.

"Interest rates are low and getting lower, which in the end puts also pressure in life insurance cause we need money to meet obligations we take for customers," he elaborated.

Troo is a partnership between global financial services provider Ageas International Insurance, and Philippine lender East West Banking Corp.

According to van Wuijckhuisje, the lower interest rates could also bring "interesting" times to insurers, as this may also mean that their clients could opt to go for stock investments rather than long-term.

"If you can hardly get any money on interest rates, so you also go to other products," he explained.

With its headquarters in Taguig City, Troo currently serves life insurance services, through branches of EastWest.

"In most times, we invest in those long-term yielding products and well, if the interest goes down, then our return there is less," he said.

"But then, it might very well be that lower interest rates makes stocks go up, and that's more for customers to look at those products," added van Wuijckhuisje.

The Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) decided to easy policy rates by 25 basis points, bringing the overnight borrowing rate to 4.25%, the overnight lending to 4.75%, and the overnight deposit rate to 3.75%.

Moving forward, van Wuijckhuisje said the company is looking to grow its presence and improve business from currently being the 16th insurer in the Philippines.

"We are okay with that cause we are still in a very much buildup phase and learning from that as well, but of course we want to grow," he said.

"Grow as hard as possible. We really believe that this is a business. We need to make money, we have to sell, in the end, to make a sustainable and viable franchise," elaborated van Wuijckhuisje. —LDF, GMA News

Tags: troo
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