Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Annuities

Restructuring the U.S. Life Insurance Sector Involves Risk: Moody's Analysts

Your article was successfully shared with the contacts you provided.

What You Need to Know

  • Private equity firms are providing plenty of funding to life insurers for transformation.
  • However, private equity firms may have a greater appetite for investment asset risk than other deal funders.
  • The strategic transformations adds to disruption and uncertainty.

Turmoil related to the COVID-19 pandemic has eased, and U.S. life insurers appear to be doing well.

But some of the steps life insurers are taking to deal with low interest rates could eventually cause problems.

Laura Bazer and other analysts at Moody’s Investors Service give that assessment in a new U.S. life sector outlook report.

A sector outlook indicates how Moody’s expects overall credit conditions to affect the creditworthiness of the companies in the sector over the next 12 to 18 months.

A year ago, Moody’s analysts changed the U.S. life sector’s outlook to negative, from stable, because of worries about the COVID-19 pandemic. The analysts changed the outlook back to stable earlier this week.

“Although the pandemic is still with us, significant progress in mass vaccinations across the U.S. population are helping to bring the virus under control,” the analysts say.

Unemployment is falling, gross domestic product appears to be growing, and the easing of restrictions on face-to-face meetings should help insurers increase sales, the analysts add.

Private Equity Impact

For life insurers, pandemic-related claims and investment losses have been lower than feared. But the analysts suggest that some of the private equity firms behind many life and annuity deals tend to choose riskier investments than traditional life insurers choose.

Life insurers’ efforts to reduce risk, by shifting toward fee-based products and services, such as asset management, and away from providing guaranteed, interest-sensitive insurance products, could also add risk, the analysts say.

“The paths of individual insurers’ strategic transformation, which may involve strategic review of their entire operations, are disruptive, adding uncertainty to their future business and credit profiles,” the analysts write.

(Image: alphaspirit/


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.