Analysis: Rising Rates Save Annuity Writers From Spread Squeeze

Rate increases might be hard on home buyers and homeowners with variable rate mortgage loans. But increases should help insurers increase the profitability of variable annuities, fixed annuities and other products designed so that earnings depend partly or entirely on interest rate spreads, Moody’s analysts write.

“If interest rates had remained at their recent lows or continued to fall, many annuity spread writers would have begun to experience a worsening decline in profitability and growth, thereby aggravating the pressure on their ratings,” says Robert Riegel, managing director of Moody’s life and health insurance group.