Safety first?

Traditional German life funds are dominated by fixed income, with a focus on credit and covered bonds. But will Solvency II models encourage more diverse portfolios? Anke Dembowski reports

In terms of asset allocation, German life funds are traditionally very safety oriented. One reason for this conservative approach is the strict legal investment restrictions (see table 1, page 20). But traditionally, German life insurance companies do not even make full use of the possibilities they are given within the legislative framework. Table 2 shows the asset allocation of German life insurance companies as per June 30, 2008, as well as over the past three years, revealing that asset