Survey: 32% Of Insurers Might Limit Sales Of Life, Annuity Guarantees

Adding rich VA living benefit guarantees has helped big insurers win market share away from smaller insurers this year, according to Hubert Mueller, a Tillinghast consultant.

But the authors of the survey report note that, although insurers have been using reinsurance to back UL product guarantees, most have been issuing the VA living benefits guarantees without reinsurance cover. Eighty-eight percent of the participating CFOs worry about the cost of reinsurance, and 53% worry about lack of current reinsurance capacity.

Because of problems with getting adequate reinsurance, some insurers are studying the possibility of using hedging strategies, offshore entities or securitization to reduce the amount of capital needed to back the guarantees, Tillinghast researchers report.

Thirty-two percent of the participating CFOs said their companies were responding to capital constraints and concerns about risk exposure by making plans to limit sales of some product guarantees in the near future. Eighty-four percent said their companies were revising product designs and product guarantees.

Fifty-three percent said their companies were thinking about changing product pricing, and sixty-three percent said their companies were adopting more extensive scenario testing.