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COVID-19 Helped Long-Term Care Insurers in 2020: Fitch

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What You Need to Know

  • Low interest rates hurt LTCI investment earnings.
  • Higher mortality rates due to pandemic reduced number of new claims.
  • One question is what will happen to mortality for very old insureds.

COVID-19 ended up giving U.S. long-term care insurance (LTCI) earnings a big boost in 2020, according to analysts at Fitch Ratings.

Jamie Tucker and David Gorak, the analysts, write in a new commentary that low interest rates continued to hurt LTCI issuers’ investment earnings, but that the pandemic helped, by increasing LTCI insureds’ mortality and reducing the number of new claims.

Thanks to the pandemic, U.S. insurers reported a total of $241 million in net operating gains from LTCI in 2020, up from a net operating loss of $2.3 billion in 2019, the analysts write.

COVID-19 mortality should continue to help LTCI issuers this year, “but the longer-term effect of COVID-19 on LTC remains unclear,” the analysts say. “Post-2021, Fitch Ratings expects LTC results to deteriorate over the coming years if mortality and morbidity experience normalize and interest rates remain low.”

LTCI issuers have little data on mortality for older LTCI insureds, the analysts write.

The Fitch analysts describe additional regulator approvals for LTCI issuer premium rate increases “essential to… offsetting losses on legacy LTC business.”

“Fitch expects regulators to continue to grant actuarially justified approvals with an aim of maintaining solvency,” the analysts say.

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