Lifted by a continued economic strength, accelerated new business from direct writers and a shift in demand to asset-accumulation products, life and health insurers and reinsurers will see modest growth next year, predicts Donna Kinnaird, president, Swiss Re Life & Health North America.
Despite moderating sales of protection products, direct writers will see premium grow because of increased demand for asset accumulation products with guarantees and living benefit riders aimed at retirement security, Kinnaird said during an economic review and outlook meeting held here by Swiss Reinsurance Company.
Among the results will be accelerating demand for universal and variable universal live insurance next year, Kinnaird predicted.
Kinnaird noted the industry is issuing innovative retirement products as investors move their 401(k) funds into retail accounts.
She also forecast increased mergers, acquisitions and corporate spinoffs as a result of the availability of a capital surplus in the life insurance industry
“We are also seeing an increasing number of capital market transactions by both direct companies and reinsurers,” she said. “We expect this trend to grow even more in the future years as companies access the capital markets to transfer risks and harvest embedded values.”
Another Swiss Re expert estimated the U.S. economy has about a 35% chance of a recession next year. More likely, the economy would continue strong, benefiting from lower oil prices, a weaker dollar and sustained consumer spending, according to Kurt Karl, chief U.S. economist for Swiss Re’s U.S. operations.
Although higher inflation or increased unemployment could send the economy into recession, Karl predicted it would be mild and brief. If the nation does see a business downturn, it would last no more than two quarters because the Fed probably would lower its rates to renew growth, he said.
Fund rates, currently at 5.25%, could fall to 4.75% by the end of 2007, Karl estimated.