NU Online News Service, Aug. 30, 3:15 p.m. – Moody’s Investors Service, New York, says it will use a tougher formula to measure the safety of U.S. life insurers’ institutional investment products.
Life insurers that sell institutional investment products try to profit by earning a higher rate of return on their own investments than they pay the institutions.
Moody’s argues that managing assets for institutions is a risky, low-profit business, and it wants life insurers to limit their exposure to the business to less than 30% of general account insurance reserves.
In the past, the agency has counted all institutional investment products about the same, but now it says it will use a “risk weighting” system to penalize insurers that have unusually risky institutional investment operations.
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Moody’s will count product risk more heavily if it believes a life insurer is backing the products with large investments in shaky bonds, the agency says.