While interest rates are a key area of concern for life insurers at this time, a new report said interest-rate sensitive life insurance premiums constituted only 4.1 percent of total premiums of large insurers for 2012.
The report said insurers with more than $10 billion in premiums had $433.069 billion in premiums written outstanding at the end of last year.
For the entire industry, interest-rate sensitive premiums constituted only 6.20 percent of total premiums of $642 billion.
The report on companies most affected by interest rates was provided by SNL Financial.
According to SNL, interest-rate sensitive products written by Lincoln National, for example, included guaranteed universal life policies, variable universal life, indexed universal life and term life policies.
It is based on data supplied to the National Association of Insurance Commissioners by insurance companies through its Interest Sensitive Life Insurance Products Report.
The report fills in the names to a Moody’s Investors Services report July 15 which indicated that a continued rise in interest rates would be credit positive for the U. S. life insurance sector, as spread products would regain popularity and reinvestment risk would decline.
But, the Moody’s report said there is a downside to higher interest rates for insurers because a rapid spike in interest rates could lead to annuity policyholders jumping to higher-return products at the same time that life insurers’ investment portfolios report unrealized losses.
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“We could revise our U.S. life insurance sector outlook to stable from our current negative stance if the recent rising interest rate trend and improving economy continues,” said Neil Strauss, Moody’s vice president – senior Credit officer.
“The prolonged low interest rate environment and macroeconomic challenges are major contributors to our negative sector outlook,” he said.
“Moody’s believes the liquidity profile of most life insurers is strong, mitigating the impact of having to crystallize losses on assets to fund policyholder surrenders,” Strauss said in the report.
Metropolitan Life is the most vulnerable life insurance company to interest-rate risk in terms of premiums outstanding, according to a new report, with Prudential Financial second.
However, MetLife is fourth most vulnerable and Pru 11th most vulnerable to interest-rate risk in terms of the proportion of interest-rate sensitive premiums to total premiums, according to the report.