'Search for yield' by pension funds poses big risks, warns OECD

Tokyo

THE current low interest rate environment around the world poses a significant risk for the long-term financial viability of pension funds and insurance companies, the Organisation for Economic Co-operation and Development (OECD) warned on Wednesday.

Chief among the concerns is that pension funds and life insurance companies might become involved in a "search for yield" in order to match the levels of returns promised to policyholders and beneficiaries when interest rates were higher.

"This poses risks, including (that of) insolvency" as these key financial institutions seek to generate sufficient returns to meet their obligations, the OECD said in the inaugural edition of its Business and Finance O…