The world's #2 reinsurer is stocking up on gold and cash to avoid negative interest rates

|By:, SA News Editor

German reinsurer Munich Re, the world's second-largest reinsurer, is boosting its gold and cash reserves in the face of the ECB's punishing negative interest rates it said on Wednesday.

Munich Re will also store at least 10 million euros ($11M) in two currencies so it won’t have to pay for the right to access the money at short notice, CEO Nikolaus von Bomhard said: “We will also observe what others are doing to avoid paying negative interest rates.” “We are just trying it out, but you can see how serious the situation is."

From Bloomberg: "Institutional investors including insurers, savings banks and pension funds are debating whether it may be worth bearing the insurance and logistics costs of holding physical cash as overnight deposit rates fall deeper below zero and negative yields dent investment returns. The ECB last week cut the rate on its deposit facility, which banks use to park excess funds, to minus 0.4%.

“This may well become a mass phenomenon once interest rates are low enough - the only question will be where that exact point is,” said Christoph Kaserer, a professor of finance at the Technische Universitaet in Munich. “For large institutions, that may be the case sooner rather than later. The ECB will react with countermeasures, such as limiting cash.”"

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