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Moody's Analysts Puzzle Over Life Insurers' COVID-19 Mortality Comments

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U.S. life insurers have given all kinds of estimates of how COVID-19 might affect life insurance claims, but the impact of increased death benefits costs could be small.

Michael Fruchter and other analysts at Moody’s Investors Service gave that assessment Monday in a look at what executives from publicly traded life insurers said during their companies’ latest earnings calls.

“The estimates are all consistent with our view that the potential claims impact of increased death benefits will be relatively small and poses a lesser risk to life insurers than the secondary market impacts of the pandemic,” the analysts write in a new commentary.

(Related: Life Claim Trickle Could Grow: Voya Executive)

Life insurers implied that they expect their COVID-19 mortality to be about 55% to 65% of the COVID-19 mortality level for the general population, and Reinsurance Group of America Inc. implied that it expects mortality for the insured population to be only about 50% of the level for the general population, the Moody’s analysts write.

Here is some of what the analysts heard about the factors that could affect each life insurer’s level of exposure to COVID-19-related life insurance claims:

  • The insureds’ age distribution.
  • Where the insureds live.
  • Whether the insureds are in employer-sponsored group life plans or have their own individual coverage.

In theory, COVID-19 could offset any increase in life insurance claim costs by lowering spending on lifetime annuities.

In reality, because many individual annuities come with features such as guaranteed minimum death benefits, COVID-19-related reductions in annuity benefits obligations may be small when compared with the life insurance death benefit impact, the analysts write.

When life insurers sell group annuities to employers, to help employers shed pension plan risk, the group annuities used to implement the pension risk transfer transactions rarely offer the pension plan participants large, guaranteed minimum death benefits.

The nature of pension risk transfer annuities means that MetLife Inc., Prudential Financial Inc. and other companies with big pension risk transfer operations could benefit from COVID-19-related annuity benefits obligations reductions more than other life insurers do, the analysts say.

— Read AIG Sees Mortality Reporting Delayson ThinkAdvisor.

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