The sub-prime mortgage crisis could have a negative impact on the sale of life insurance products, according to a recent research report issued by LOMA, Atlanta.

The report is titled “The Sub-prime Mortgage Crisis: A Crisis of Structured Finance and Its Effects on Insurers.”

Among the possible impacts the report says the crisis may have is that insurers may see a drop in the demand for life insurance and annuities and an increase in fraud.

The reason, the report explains, is that households in financial trouble are less likely to buy life insurance or annuities. The report adds that more policyholders will borrow against their policies to lapse or sell them through life settlements.

Additionally, the report continues, the growth of accumulation annuity considerations is likely to slow.

Other possible outcomes include:

–The possibility that the prospects for stable-value subaccounts in 401(k) products are likely to improve if there are losses in equity or bond sub-accounts.

–Hedging costs could skyrocket with “significant impact on the profitability of their variable products.”

–Rising inflation in the wake of the sub-prime crisis could prompt customer defections from fixed-rate products.

The reason hedging costs could increase, the report says, is that banks are often the counterparty to these hedging transactions and will be looking for revenue to offset sub-prime losses.

Member companies have not indicated that they are seeing any of these trends, says Whit Cornman, a spokesman with the American Council of Life Insurers, Washington. “Traditionally, during tough times people have turned to stable vehicles such as life insurance,” he adds.