The current economic turmoil may be hindering reinsurers’ efforts to share the burden of financing Triple-X term life insurance reserves with investors.
Analysts at Moody’s Investors Service, New York, report that observation in a review of the world reinsurance industry outlook.
Reinsurers do not have much immediate need to raise capital, but the recent capital market upheaval may be raising the cost of securitizing Triple-X reserve liabilities, and increase the likelihood that investors will want the parent of the securitizing entity to share the pain if the entity does poorly, the Moody’s analysts write.
“Moreover, the trend toward principles-based reserving in the U.S. will likely reduce the regulatory arbitrate that has fueled this market,” the analysts write.
The analysts predict that life reinsurers will cope with modest growth rates in their traditional lines of business by seeking to reinsure more indexed annuities, life and annuity products with secondary guarantees, and health care products.