The International Association of Insurance Supervisors says prolonged low interest rates are causing sobering changes in life insurers’ operations all around the world.

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Some life insurers may be making some changes in investment strategies. But partly due to stringent investment regulations, insurers are responding to low rates mainly by changing what they sell, the Basel, Switzerland-based regulator group says in its new 2016 insurance market report.

Life insurers in the United States have been backing away from selling especially interest-sensitive products, such as long-term care insurance and retirement products that offer long-term interest rate guarantees. The same thing is happening in Europe, the IAIS says.

Many insurers are offering “unit-linked” products, or variable-rate products with benefits that depend on the performance of investment instruments that the policyholders chose.

“Policyholders thus bear the investment risk,” the IAIS says. “As life insurers shift investment risk back to the policyholders, they face greater competition from other financial institutions, including banks and assets managers.”

It’s also questionable, the IAIS says, whether individual policyholders are better suited to assuming long-term investment risk than life insurers are.

“The low level interest rates and investment yields puts tremendous pressure on life insurers to improve their expense management and to reduce costs,” the IAIS says.

Related:

Yellen backs gradual rate rises as Fed not behind the curve

Insurance regulators respond to ongoing low interest rates 

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