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  • AM Best: Low Interest Rates Challenge Life/Annuity Writers (AM BestTV)

    August 26, 2020 by AM BestTV

    OLDWICK, N.J.–(BUSINESS WIRE)–In this episode of AMBestTV, Associate Director Jason Hopper and Financial Analyst Igor Bass, both of AM Best, said economic turmoil from the COVID-19 pandemic is creating new challenges for life/annuity writers. Click on http://www.ambest.com/v.asp?v=interestrates820 to view the entire program.

    Hopper outlined the steps that the life/annuity insurers have taken to de-risk their portfolios, while also describing some of the differences between interest-sensitive companies and non-interest-sensitive companies.

    “The goal of the AM Best report was to see how investment strategies among these two groups have diverged,” said Hopper. “The report split the insurance industry into two camps based on product profiles and reserves in premium mix. Interest-sensitive companies are primarily individual or group annuity writers, deposit-type contracts or interest-sensitive life products, as defined by the NAIC. The results from the report were that there are twice as many non-interest-sensitive companies as interest-sensitive ones. However, interest-sensitive companies command about three-quarters of the total industry’s assets.”

    Bass addressed to what extent operating results vary between the two groups.

    “Interest-sensitive companies only represent a quarter of the population, but generate a majority of the earnings. The pretax and operating earnings have been consistent for the most part with these companies, albeit with more fluctuation, over the last 10 years, but they are still positive. Additionally, yields for interest-sensitive companies have been declining over the last couple of years, more so than for non-interest companies. However, interest-sensitive companies have a tendency to reach for the higher yield, which results in more risk in their portfolios.”

    To access the related special report, titled, “Interest Rates: Different Impact Severity, Different Strategies,” please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=299809.

    Recent AMBestTV coverage includes:

    • AM Best: Pandemic, Economic Issues Dampen Chile Insurance Market: Eli Sanchez, associate director, AM Best, said the rating agency’s negative market segment outlook on Chile’s insurance sector is based on declines in insurance activity, tied to the pandemic and longer-running economic issues: http://www.ambest.com/v.asp?v=chileoutlook_english720.
    • AM Best: Cyber Insurance Profitability Challenged by New Risks: AM Best analysts say standalone cyber insurance premiums are growing as companies reduce silent cyber risk: http://www.ambest.com/v.asp?v=ambcyber720.
    • BDO Director: Companies Should Review Hurricane Response Plans: The COVID-19 pandemic adds a layer of complexity to hurricane response plans, said James MacDonnell, director of crisis management/ business continuity at BDO, an advisory firm: http://www.ambest.com/v.asp?v=macdonnell820.
    • ITC Conference Expands to Month Long ‘Celebration of Insurtech Innovation’: InsureTech Connect is launching ‘ITC September to Remember’ leading up to its flagship global conference, said Mee-Jung Jang, president, InsureTech Connect: http://www.ambest.com/v.asp?v=itc820.

    AM BestTV covers exclusive AM Best and insurance industry information and reports, targeted topics and key developments in the insurance, reinsurance and related sectors dailySign up for alerts of episodes at www.ambest.com/multimedia/ambtvsignup.html. View AM BestTV episodes at www.ambest.tv.

    AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

    Copyright © 2020 by A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

    Contacts

    Lee McDonald
    Group Vice President, Publication and News Services
    +1 908 439 2200, ext. 5561
    lee.mcdonald@ambest.com

    Originally Posted at Business Wire on August 24, 2020 by AM BestTV.

    Categories: Industry Articles
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