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Ken Griffin. (Photo: Barings)

Life Health > Annuities > Fixed Annuities

Life Insurers Should Plan for Stress: Barings' Insurance Head

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What You Need to Know

  • Some say life insurers should match long-duration benefits with long-duration assets, but Griffin disagrees.
  • One thing Griffin does worry about: Bad insurer choices about asset durations.

Ken Griffin is in charge of helping life insurance and annuities keep their promises to your clients.

Griffin is the new head of insurance solutions at Barings, a Charlotte, North Carolina-based asset management arm of MassMutual. Barings has about $349 billion in assets, including $223 billion in insurance assets under management.

Griffin will work with insurers to manage some of the investment portfolios that support life insurance, disability insurance, long-term care insurance and annuity benefits guarantees.

He earned a bachelor’s degree in business from the University of North Carolina at Chapel Hill, then went to work as an actuarial analyst at a property and casualty insurer.

He moved into the life insurance and annuity world, as a director at Swiss Re, in 1999. He worked for 16 years as head of insurance solutions at Conning, and about five years as head of asset-liability matching strategy at Brighthouse Financial, before joining Barings in July.

We asked Griffin, via email, what he’s seeing in the world of life insurance company assets now that markets are more volatile and interest rates are heading higher.

THINKADVISOR: For insurers that issue life insurance and annuities, what kinds of arrangements or strategies have worked especially well, or especially poorly, over the past year?

KEN GRIFFIN: Given the huge market swings in rates and spreads we have seen over the past year, the best strategies are those that diversify the risk profiles of insurer investment portfolios.

This would include increased allocations to asset classes that pay an illiquidity premium.

Poor strategies include companies that attempt to duration match their liabilities which requires poorly timed “duration chasing.”

During periods of volatile rates, companies extend duration when rates are low and liability durations have increased, and shorten duration when rates are high.

What effect, if any, have you experienced as a result of the COVID-19 pandemic, the upheaval in Europe, and fluctuations in exchange rates? What have you learned from that?

Longer-term strategic views can help weather the storms experienced over the last couple of years.

Knee-jerk reactions to market events are never appropriate, though the inclinations to react may be quite strong.

Proper risk management must be in place to ensure long-term strategies are tenable under even extreme short-term duress.

Rising interest rates seem to be causing at least short-term headaches for some life and annuity issuers. Could the companies have done anything to avoid that?

Robust stress testing should have identified any potential issues with rising rates.

If insurers were caught over-extending asset durations when rates were abnormally low, this could have set the stage for steep market-value declines and a possible liquidity crunch as policyholder lapses increase.

What do you think life insurance agents and financial advisors should be looking for in terms of life insurance company asset management? Is this topic relevant to them? 

Agents and advisors should be concerned with the longer-term financial viability of insurers as they protect their policyholders.

This may not necessarily mean promoting the insurers with the highest crediting rates, but focusing on those with proven, stable results over multiple investment cycles.

Asset management is an essential core competency for an insurer, and good asset management may require outsourcing some or all of this skill to prudently diversify portfolios for the best results. Outsourcing has the advantage of leveraging the scale of large third-party managers.

Agents and advisors should recognize insurers with strong management teams and asset management capabilities.

What do you think about the infrastructure investment incentives in the new Inflation Reduction Act? Could that affect life insurers?

Recent Congressional actions have served to highlight the need for infrastructure investments, which publicizes and promotes infrastructure funding.

This should only expand opportunities for insurers to participate in an asset class that brings excellent diversification aspects to insurers’ credit risk profiles, as well as a class with scarce long-dated investments to support long insurer liabilities.

Ken Griffin. (Photo: Barings)


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