Susan Neely at the 2020 ACLI annual conference Susan Neely presented the ACLI’s new EERE initiative Monday, in an annual conference session held over the internet. (Credit: ACLI)

The American Council of Life Insurers (ACLI) wants Congress and state government to help life insurers invest more money in underserved communities.

The life insurer group has included an investment incentive provision in  a new Economic Empowerment and Racial Equity Initiative (EERE).

The ACLI unveiled the initiative today, during an annual conference session held over the internet.

Resources

The Washington-based life insurer group put a cautious statement summarizing the EERE proposal on an EERE website:

Consistent with stringent state investment requirements, ACLI supports voluntary initiatives which help facilitate institutionally sound investments that bring economic opportunity to underserved.

ACLI supports state and federal legislation establishing tax incentives and other measures that promote investments in underserved communities.

Susan Neely, the ACLI’s president, said at the conference that U.S. life insurers already have $6.3 trillion invested in the United States, in everything from housing to agriculture.

“We make long-term promises, so the nature of our investing looks to long-term, stable returns,” Neely said. “During the 2009 financial crisis, life insurers invested heavily in Build America Bonds — to the tune of $60 billion….about one-third of the total bond issued by the federal government. We endeavor to promote purpose-driven investment in areas like affordable housing, broadband access, and other services benefiting underserved communities.”

George Floyd’s Death

Derek Chauvin, a Minneapolis police force, kneeled on the neck of George Floyd, a Black Minneapolis resident, on May 25, for 8 minutes and 46 seconds, while he was being recorded with a phone camera, and as Floyd died.

Viewings of the the video, and the protests following Floyd’s death, led to shock and intense discussions in the life insurance industry this past summer.

The National Association of Insurance Commissioners has set up a Special Committee on Race and Insurance. The NAIC effort appears to be focusing mainly on insurance products, insurance underwriting, and insurance industry employment.

The ACLI has been part of another response effort, at the U.S. Chamber of Commerce.

The EERE Initiative

In addition to the investment tax incentive provision, the ACLI proposal calls for efforts to:

  • Expand diversity and inclusion within companies, and on corporate boards.
  • Use financial education to help people achieve economic empowerment.
  • Help people in underserved communities get more access to affordable financial security protection.

In the financial security protection section, for example, he ACLI says the following:

ACLI supports a regulatory framework that eliminates any potential proxy discrimination in the delivery of life insurance to the consumer. ACLI supports removing any unnecessary barriers that may impede the ability of people of color to become licensed by or employed with the insurance industry.

ACLI supports innovation and technologies that are part of the solution by driving expanded consumer access and consumer affordability in the middle market and underserved communities.

A Potential Yield Opportunity

For life insurers, any big new programs meant to increase investment in underserved communities could lead to a new defense against the current low interest rate environment.

The Federal Reserve Board has done what it can to lower short-term interest rates, in an effort to help the stock market, and borrowers who have variable rate loans.

Many corporate borrowers have plenty of cash, and are uncertain about the future. Companies’ uncertainty about what to do with cash has held down corporate borrowing and further depressed interest rates.

Tax breaks, federal or state credit guarantee mechanisms, and state insurance regulator support for life insurer investments in new underserved community investment programs could all increase the odds that life insurers could use the new programs to boost overall portfolio yields, as well as to do things like improving the internet service options in underserved communities.

— Read California to Help Diverse Investment Managers Get Insurers’ Attentionon ThinkAdvisor.

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