5 Things to Know About Pandemics, for Annuity Sellers
March 11, 2020 by Allison Bell
Health insurers and life insurers know that the virus that causes Covid-19 pneumonia could lead to more claims.
The people who write, market and sell annuities are starting to think harder about how a large disease outbreak in the United States, such as a severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) epidemic, could affect them.
Here are five possibilities, based in part on papers actuaries and economists wrote in the early 2000s, in response to concerns about what might have happened if the 2002-2004 severe acute respiratory syndrome (SARS) outbreak had not been contained so well.
1. Fear-related turmoil could hurt annuity issuers’ investment returns.
Annuity issuers use trillions of dollars in corporate bonds and other fixed-rate investments to support their products.
In the past few weeks, investment market turmoil has pushed the Federal Reserve Board to cut interest rates, in an effort to calm investors, and to encourage them to put fewer assets in bonds and more in stocks.