## Figure 1.11. Life Insurers’ Market Valuations and Risk Outlook

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**Canonical URL:** [Figure 1.11. Life Insurers’ Market Valuations and Risk Outlook](https://www.imf.org/-/media/files/publications/gfsr/2017/october/chapter-1/pdf-data/figure1-11.pdf)

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### 1. Life Insurers: Return on Equity
- ROE categories shown: "ROE < 8%", "8% ≤ ROE ≤ 10%", "ROE > 10%".
- Period averages reported for "Precrisis (2005–06 average)" and "2017 (year-to-date average)".
- Bank averages and regional groupings displayed: "United States", "Europe", "Japan".
- Note: "the implied cost of capital was about 10 percent before and after the global financial crisis."

### 2. Life Insurers’ Price-to-Book Ratios
- Finding: "Half of European and US insurers are valued below their book values and below precrisis levels."
- Period comparisons: "2005–07" versus "2014–16" shown for markets.
- Regional labels included: "Europe", "United States", "Japan".

### 3. Duration Mismatch and Guaranteed Return Spreads
- Axes shown: "Long-term yield on sovereign bonds minus average guaranteed returns (percent)" with scale from "–6" to "16".
- Axes shown: "Duration of liabilities minus duration of assets (years)" with scale from "–3.5" to "1.5".
- Country labels included (ISO codes displayed in figure): "IRL", "ITA", "GBR", "JPN", "NOR", "SWE", "DEU", "NLD", "KOR", "CHE", "CAN", "USA", "FRA", "BEL".
- Bubble size relation: "the size of the bubble relates to the share of liabilities with guaranteed returns to total life insurance liabilities."
- Color coding explanation:
  - Green = "countries with insurance sectors that have low guaranteed returns and low or negative duration mismatch."
  - Yellow = "countries with insurance sectors that have either high guaranteed returns or a high duration mismatch."
  - Red = "countries with insurance sectors that have both high guaranteed returns and high duration mismatch."
- Summary statement: "Guarantees and duration mismatches remain high for a large part of the sector."

### 4. Projected Number of Years until Bond Yields Fall below Guaranteed Returns
- Scenarios depicted: "Current interest rate environment" and "100 basis point increase in sovereign and corporate bond yields."
- Finding: "Some insurers may soon face negative investment spreads."
- Additional note: "In both cases in panel 4, guaranteed returns continue to decline."
- Specific conditional result: "In the case of a 100 basis point increase in bond yields, Belgian, Japanese, and US investment yields are not expected to fall below guaranteed returns."
- Country labels shown along the comparison axis include: "US", "A", "BEL", "JPN", "NLD", "DEU", "SWE", "NOR", "DEU", "NL", "SWENOR" (as displayed in the figure).

*Sources: Annual reports; Autorité de Contrôle Prudentiel et de Résolution; Bloomberg Finance L.P.; Bundesbank; De Nederlandsche Bank; European Insurance and Occupational Pensions Authority; Moody’s Investors Service; National Association of Insurance Commissioners; Nationale Bank van België; NLI Research Institute; Office of Financial Research; Organisation for Economic Co-operation and Development; SNL Financial; and IMF staff estimates.*

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_Source: https://www.imf.org/-/media/files/publications/gfsr/2017/october/chapter-1/pdf-data/figure1-11.pdf_