Some of Europe’s biggest insurers are selling protection insurance to German banks, who are hoarding billions of euros in vaults to avoid the impact of negative interest rates.
Reuters has reported executives at Europe’s biggest insurers are setting up consortia to insure the vaults. Executives from both Allianz and Ergo have said they are seeing an increase in German banks requesting cash insurance, with Talanx and
AXA also offering similar policies.
Storing your cash physically is becoming a cheaper prospect than keeping it in the European Central Bank. The current negative interest rate of 0.4 per cent means for every EUR€1000 a bank stores there, they lose EUR€4 every year.
Storing cash as notes is a far more complicated process thanks to security costs and the physical space it takes up. It’s also susceptible to catastrophes like fire.
Although sources speaking to
Reuters confirmed the current deposit rate could be as high as twice as much as the costs associated with storing it physically, including insurance and security, as long as the amount of cash in the vault is large enough, it becomes the far cheaper option.
While interest rates remain negative in Europe, the demand for insurance for these cash reserves is only likely to grow.
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