Zurich Faces Years of Low Investment Yields on Rates, Reyes Says

Zurich Financial Services AG (ZURN) Chief Investment Officer Cecilia Reyes said income from bond investments will stay “low for years to come” as central banks keep borrowing costs near zero to help bolster their economies.

“It will be a challenge to meet our investment-income targets if the low level persists,” constraining insurers’ ability to meet minimum guarantees in some life products, Reyes said in an interview at the World Economic Forum in Davos, Switzerland today. “At the same time, we have volatility in markets. Our focus is on keeping the balance sheet very strong.”

The U.S. Federal Reserve said yesterday that the benchmark rate would stay at low until at least late 2014, longer than originally forecast. Insurers are among the world’s biggest investors, and are hurt when low rates reduce the yield on new government debt.

Reyes became chief investment officer of Switzerland’s biggest insurer in 2010, when her predecessor Martin Senn took the helm at the company.

Reyes said the European Central Bank should do more to help stem the region’s sovereign-debt crisis.

“We need a more overt role for the ECB to also support the sovereign-debt market and try and eliminate the default risk,” she said.

To contact the reporters on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net; Simone Meier in Zurich at smeier@bloomberg.net.

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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