Nothing is certain in life but death, taxes and the reality that long-term care insurance has moved into the doghouse forever.
And it's possible that there are now doubts about the third item on that list.
Elyse Greenspan and three other securities analysts at Wells Fargo hinted as such last week in a commentary with the title, "Life Insurance: No Longer Beware of LTC..?"
The Wells Fargo team is not saying that insurers should rush out to try to write new stand-alone long-term care insurance, but the analysts are suggesting that issuers may be able to make reasonably attractive deals to put their old LTCI business on the books of a reinsurer.
"There is wood to chop in terms of LTC risk transfer business to transact," the analysts said.
What it means: One obstacle to life and annuity issuers writing new long-term care insurance is concerns about the old LTCI policies on their books. These policies may have been written when ordinary savings accounts were paying 10% annual compounded interest and insurers' understanding of how LTCI policies actually worked was primitive.
Now, issuers may be able to find reinsurers to help share the burden of old problems.
Perhaps more important, insurers now see that the idea that LTCI must be shunned is starting to fade, and they may be able to find new reinsurers to help support efforts to write new LTCI business.
Genworth, for example, has said that it expects its CareScout Insurance unit to work with a highly rated reinsurer to begin writing carefully designed and carefully priced LTCI policies.
A return of the stand-alone LTCI market is important because those policies can do more than any other product to maximize the amount of protection against long-term care risk per premium dollar.
The history: Issuers of stand-alone long-term care insurance began warning financial professionals and consumers in the late 1960s that the aging of the baby boomers would create a tsunami of long-term care risk.
The companies built LTCI into a significant generator of revenue. But they got almost all of their assumptions wrong — except that many aging boomers would need long-term care.
By the time the oldest boomers were in their late 50s, and old enough to understand the concept of LTC risk, LTCI issuers were beginning to pull out of the market. Today, only about a dozen companies write much stand-alone LTCI coverage.
Reinsurance: When the "direct writers" use reinsurance, or insurance for insurance companies, to move risk off their books, they keep ultimate responsibility for ensuring that the claims get paid, but the benefits obligations may have less impact on the kinds of financial results that get the most attention from investors and securities analysts.
The commentary: The number of reinsurers willing to consider LTCI reinsurance deals has increased to about six to 10, from fewer than five a few years ago, according to the Wells Fargo analysts.
"This includes both traditional global reinsurers and alternative asset manager-backed reinsurers," the analysts wrote.
Some of the would-be reinsurers believe that they have too much life insurance mortality risk, and they want to diversify by getting into a business that could do well when mortality levels are high, the analysts noted.
Many of the LTCI reinsurance deals have involved blocks of LTCI policies with older insureds, and extensive information about how the insureds have aged, but now reinsurers may be more comfortable with reinsuring blocks of LTCI policies that cover younger insureds, the analysts said.
Investors' concerns about LTCI have weighed down the prices of the stocks of companies like MetLife and Unum, and those companies' stocks might flourish if the companies could find reinsurance deals for their old LTCI blocks, the analysts said.
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