Life insurers have taken many “special charges” in recent years in connection with changes in the assumptions they use to set rates for products such as long-term care insurance and annuity benefits guarantees.
John Nadel, a securities analyst at Credit Suisse, said Wednesday in New York that he wished he had a lot more information about the overall size and nature of life insurers’ assumption-related risk, not just about the assumption changes that lead to the special charges announced in insurers’ quarterly earnings releases.
Nadel talked about the assumption risk issue during a session on life insurance sector tends, at an S&P Global Ratings insurance conference.
Nadel noted that past interest rate assumptions could have a big effect on long-term care insurance issuers.
If rates stay much lower than the issuers had assumed, then continuing to get premium increases approved by state regulators “won’t help much,” Nadel said.
Deep Banerjee, an S&P analyst, said the most serious problem insurers have with assumptions involves efforts to understand their customers.
“The thing that’s hardest to manage is what policyholders’ behavior will be,” Banerjee said.
— Read Higher Interest Rates and LTCI: What to Know on ThinkAdvisor.