John Frye (Credit: Investors Heritage Life Insurance Company)
State insurance regulators and auditors have made the managers of Investors Heritage Life Insurance Company prepare for many different economic scenarios and catastrophic mortality scenarios that didn't look much like the new COVID-19 pandemic world.
The result: The Frankfort, Kentucky-based company was in a good position to adjust for this scenario.
John Frye, the company's co-president, said in an interview Thursday that, overall, the sudden, dramatic shift in how Investors Heritage operates has gone smoothly, the company has the financial resources it needs to weather the COVID-19 pandemic, and he has no reason to believe his company's stability is unusual.
"We feel we're in a pretty good position," Frye said. "We think the industry is in pretty good shape."
The idea is that typical small and midsize life insurers might be in pretty good shape because of the disaster preparation efforts that life insurers have been making in response to earlier crisis situations, such as the Sept. 11, 2001, attacks on New York and Washington; the major hurricanes that have hit New Orleans, New York and other cities; the 2007-2009 Great Recession; and the underlying fear that something like the 1918 influenza pandemic could happen again.
Investors Heritage
Investors Heritage was founded in 1960. It now focuses on selling products such as single-premium immediate annuities, single-premium whole life insurance policies, multi-year guaranteed annuities (MYGAs), and life insurance and annuity arrangements designed to pay for funerals.
The company has about 100 employees. In the third quarter of 2019, it had about $808 million in assets, according to a filing in the California Department of Insurance filing database.
Investors Heritage was a publicly traded company for many years. Aquarian Holdings, an investment firm based in New York, acquired Investors Heritage in 2018 and later helped it enter the MYGA market.
Aquarian made John Frye — an operating partner who served as the chief financial officer at Security Benefit from 2008 through 2013 — the co-president of Investors Heritage in June 2019.
Crisis Prep
Regulators and auditors have always required Investors Heritage to show how it would handle big shocks to invested assets and claim liabilities, and they also have required the company to develop detailed business continuity plans, to show how managers would keep the company going after a crisis, Frye said.
Investors Heritage managers were already thinking about three major COVID-19-related disruption scenarios in late February and early March, partly because the company was going through a routine risk management review process, Frye said.
Managers thought about the possibility that schools and daycare centers could close down, and cause problems for specific employees; the possibility that Investors Heritage could be unlucky, and face severe disruptions due to COVID-19 while most other companies were operating normally; and the possibility that COVID-19 could lead to widespread business disruption.
Even though managers included a scenario involving widespread disruption, the general sense was that Kentucky was probably more likely to have school shutdowns than widespread work-at-home requirements, Frye said.
But, because of all of the planning, Investors Heritage had enough servers, data pipes and outsourcing services in place to give all employees the ability to work at home. The risk management reviews going on in February and March revealed that about half of the workers needed extra equipment to be able to work at home. Information technology managers knew what they wanted to buy to prepare for having everyone work at home.
A little later in March, when the possibility of a general work-at-home scenario increased, the company, the IT managers simply bought the items that were on their pandemic prep shopping list, from the company's usual IT equipment suppliers.
