Chief financial officers from North American life insurance companies acknowledge that their industry faces considerable cost and talent management challenges coinciding with several significant regulatory initiatives, according to a new survey by global professional services company Towers Watson.
The survey explores life insurers’ preparation to comply with current and emerging regulatory reporting requirements, and the impact these new regulations will have on business operations.
The survey addresses requirements for the International Financial Reporting Standards (IFRS) 4 Phase 2; National Association of Insurance Commissioners (NAIC) Own Risk and Solvency Assessment (ORSA); NAIC Valuation Manual (VM) 20; Actuarial Guideline (AG) 38, revisions for 8D and 8E; and Statement of Statutory Accounting Principles (SSAP) 102/92.
“The complexity of these new life insurance regulatory requirements makes it imperative that insurers understand exactly how these changes will alter everything in their business — from supplementary reporting to capital financing for products such as universal life with secondary guarantees and term insurance,” says Jack Gibson, managing director, life insurance consulting, Towers Watson.
Half of the survey participants expect major changes to the product design and pricing for their universal life product with secondary guarantees. Seventeen percent will stop selling universal life altogether or significantly curtail its sale, while 33 percent will make changes on product design and/or pricing.
Fifteen percent will implement major changes to their annuity products. More than half are considering design changes to their pension (55 percent) and retiree medical and life plans (64 percent).