We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Blog + Articles

Categories

  • Industry Articles (12,972)
  • Industry Conferences (2)
  • Industry Job Openings (16)
  • Negative Media (127)
  • Positive Media (73)
  • Sheryl's Articles (490)
  • Sheryl's Blogs (146)
  • Wink's Articles (194)
  • Wink's Blogs (166)
  • Wink's Press Releases (77)
  • Blog Archives

  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • May 2008
  • February 2008
  • Best’s Special Report: Are Life/Annuity Insurers Prepared to Weather Another Economic Downturn?

    July 2, 2019 by AM Best

    OLDWICK, N.J.–(BUSINESS WIRE)–Although many precursors to the 2008-2009 financial crisis are repeating today, AM Best believes the life/annuity (L/A) industry is much more resilient than a decade ago and well-positioned to navigate future challenges. Still, many of AM Best’s concerns in the run-up to the financial crisis exist today, and a new special report looks at how prepared L/A insurers are in the event of a new economic downturn.

    The new Best’s Special Report, titled, “Are Life/Annuity Insurers Prepared to Weather Another Economic Downturn?” notes that prior to the 2008-2009 financial crisis, the industry had been riding the tailwinds of favorable years, and that economists were expressing concern about global economic volatility, credit cycle downturns, corrections in equity markets and an inverted yield curve that first started appearing in 2006. Macroeconomic conditions in the United States soon became more unfavorable as the effects of the subprime crisis started to emerge. The financial system was flooded with a growing number of loan securitizations as new loans, and the securities derived from them, began to challenge market stability and diminish companies’ ability to manage risk effectively. These factors in combination presaged the financial hardship.

    In response to the crisis, many L/A insurers reduced holdings of collateralized mortgage obligations and increased their holdings of cash and cash equivalents, as well as U.S. government securities in an effort to maintain liquidity. In addition, there were increased allocations to corporate bonds. The overall quality of L/A insurer bond portfolios stabilized as the level of investment grade holdings increased to levels seen before the crisis. Within the investment grade category, however, there has been a steady increase in allocations to Class 2 bonds, with BBB rated bonds having the highest exposure.

    From a product perspective, one of the largest shifts since the financial crisis has been the migration to fixed annuities from variables. In 2007, approximately 60% of total annuity premiums could be attributed to variable annuities. By 2018, the overall percentage had dropped to nearly 40%.

    Given the current geopolitical, interest rate and equity market environment, economic volatility may well increase. As L/A insurers’ investment portfolios have migrated toward higher risk, with allocations to untested assets such as collateralized loan obligations growing and holdings in mortgage and alternative assets increasing, today’s global economic conditions resemble those of 2007. Shifts toward more fixed annuity products will help L/A insurers navigate the future, as these products generally have less policyholder optionality and may be more manageable from a risk management perspective. Available capital also has grown steadily since the financial crisis; however, as economic conditions change, so may risk charges.

    The L/A industry also will face several accounting and regulatory changes over the next few years. Term products likely will see relief from less redundant reserves, and variable annuity reserves and capital requirements will change to better reflect the economic benefits of hedging and eliminate non-economic volatility. Companies were already identifying the need to improve legacy technology and upgrade systems before the financial crisis. AM Best expects that pace of such changes will quicken as technological advances create more opportunities to accomplish these goals.

    To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=286972.

    AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visitwww.ambest.com for more information.

    Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

    Contacts

    Thomas Rosendale 
    Director 
    +1 908 439 2200 ext. 5201 
    thomas.rosendale@ambest.com

    Originally Posted at BusinessWire on June 26, 2019 by AM Best.

    Categories: Industry Articles
    currency