President Donald Trump’s use of executive orders to make sudden federal policy changes has raised questions about whether the congressional and judicial checks and balances of the past will have much effect on his administration’s actions.

But analysts from New York-based S&P Global Ratings are operating under the assumption that the regulatory environment for life insurers will look about the same. The analysts spoke Tuesday at a presentation on how S&P sees the insurance industry.

Deep Banerjee, an S&P director, said that while the life sector has faced regulatory changes, it’s been fewer than many other sectors the company tracks.

“There’s uncertainty in terms of the tax code,” Banerjee said.

He and his colleagues said life insurers will also face continuing changes in conduct and capital standards.

But Banerjee added that the U.S. life insurers it rates are strong enough to adapt to almost any conceivable change, if they are given some time to adapt.

Related: Final DOL fiduciary rule: A bane or blessing for advisors?

S&P analysts’ views on insurers can have a significant indirect effect on agents and brokers, by affecting how much insurers pay investors for capital, and by affecting how much insurers can charge for access to their financial strength.

S&P analysts have assigned a stable outlook to the life sector.

Rising interest rates, strong capitalization levels and strong demand for blocks of in-force life and annuity businesses should all help the sector players S&P rates do well, the analysts said at the conference.

S&P analysts have assigned a stable outlook to the life sector. (Photo: iStock)S&P analysts have assigned a stable outlook to the life sector. (Photo: iStock)

The analysts acknowledged, for example, that product design changes and concerns about federal fiduciary standard rule efforts have hurt sales of annuities.

But Carmi Margalit, a senior director at S&P, said he is certain indexed annuity sales will bounce back, or that some similar products better-suited to the new rules will take the place of the old indexed annuities.

“There’s a lot of money that needs to find these solutions,” Margalit said.

Banerjee expressed no optimism about stand-alone long-term care insurance.

“There’s going to be a lot of legacy long-term care insurance,” Banerjee said. “Generally speaking, you can’t offload these lines of business.”

Premiums will go up, but low lapse rates will probably keep the policies on the insurers’ books, Banerjee said.

Hybrid products that combine LTC benefits with life insurance coverage or annuity contracts appear to be doing well, Banerjee said.

Katilyn Pulcher, an S&P associate director, said life insurers might profit from a wave of shutdowns of traditional defined benefit pension plans from this year through 2019, as high federal pension insurance premiums and new mortality tables take effect and increase sponsor costs.

Life insurers are in a good position to take responsibility for the pension plans off the sponsors’ hands, because they have an appetite for longevity risk and the in-house actuarial expertise to manage the risk, Pulcher said.

Related:

Coming soon: President Trump’s fiduciary rule executive order

Regulatory burden review

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