NU Online News Service, May 7, 2004, 5:18 p.m. EDT – More North American life insurers want to hedge their variable annuity product guarantees against investment risk.[@@]
About one-quarter of affected big and midsize North American life insurers already hedge exposure to VA guarantees that are linked to the performance of the stock market, and another 34% hope to do so in the next 12 months, according to a new survey report from Tillinghast-Towers Perrin, New York.
Researchers at the actuarial consulting firm have based the report on completed questionnaires from 36 life insurance company chief financial officers.
Business is better, and 40% of the CFOs say net income increased more than 10% between the first quarter of 2003 and the latest quarter.
But, after years of low stock prices, reinsurance problems and regulatory scrutiny, life insurance company CFOs continue to push for improvements in risk and capital management. Although 48% of the CFOs cite regulatory changes as an important factor driving reform and 55% cite financial reporting issues, 71% of the CFOs admit that heat from the rating agencies has caught their attention.
More than 40% of the CFOs surveyed work for life insurers that have sold variable products with guarantees, and those insurers face especially big changes.