Life Insurers Facing Interest Rate Dilemma
Life insurers will continue to face numerous challenges for the duration of 2003, according to speakers at a recent financial services conference hosted by UBS Warburg here.
One problem is just what an insurer should wish for, one speaker suggested.
If interest rates remain low or decline further, insurers could see minimum crediting rates come into play on fixed annuity products, according to Mark Puccia, managing director of insurance ratings with Standard & Poors Corp., New York.
On the other hand, he said, if rates rise too quickly, the bond portfolios of some insurers could be under water.
So, many would like to see a slow, steady increase in rates, Puccia said.
Even if the impact of interest rates is managed by insurers, the investment portfolios of companies are likely to continue being impacted by a decline in corporate credit quality in 2003, he said.
S&Ps baseline assumption, he said, is that there will be “a fairly stable equity market” in 2003.