NEGATIVE INTEREST RATE AND THE POSSIBILITY OF TERMINATING LIFE INSURANCE CONTRACT DUE TO CHANGED CIRCUMSTANCES

Although low interest rates, after the global financial crisis, were supposed to have positive effects on economic activity, such policy also had certain disadvantages that adversely affected the financial system. In this paper, the author discusses life insurance where the insured’s share in the insurer’s profit is contracted, the insurer’s contractual protection against unfavourable interest rate trends, the possibility of terminating or amending a life insurance contract due to changed circumstances based on legal provi- sions and legal theory, and partly aspects of the legal nature of life insurance contracts. The author concludes that life insurance contracts have characteristics that classify them as bilateral contracts, but also because of that they do not meet the requirements to be onerous contracts (it is a legal, not economic-financial characteristic of life insurance contracts). The main obstacle for implementation of the institute of changed circumstances to life insurance contracts is their aleatory legal nature and general principles of contract law that do not take into account economic effects of that insurance line. The institutional framework, indifference of legal theory and case law regarding implementation of the institute of changed circumstances to life insurance contracts due to negative interest rates will continue to burden insurers.

Key words: interest rate, life insurance, profit share, changed circumstances