|[October 28, 2013]
A.M. Best Special Report: Low Rates Take Insurers Back to the Future in Commercial Mortgage Lending
OLDWICK, N.J. --(Business Wire)--
The challenging low interest rate environment remains a key concern
facing the life/health insurance industry. Many life insurance companies
are searching for alternatives to help maintain investment spreads as
they look to put cash flow from premiums received, as well as maturing
securities and interest income, to work. In most cases, the maturing
securities were providing higher coupons than are available in today's
investment environment, causing portfolio yields and earned rates to
decline steadily. At the same time, many companies are at or nearing
guaranteed minimum crediting rates on large blocks of in-force policies.
A.M. Best Co. believes life and annuity writers are at particular
risk from their heavy dependence on net investment income to help
support their interest-sensitive liabilities in this prolonged low
interest rate environment. A.M. Best has seen organizations continuing
to refine their investment strategies, often t the margin, as they
search for additional yield.
Despite ongoing uncertainty over the economy's direction, and specific
concerns with the low interest rate environment, life insurers'
investment portfolios have held up well thus far, with most insurers
reporting relatively modest investment impairments in 2012 and through
most of 2013. In addition, as of year-end 2012, companies had reported
relatively large unrealized gains in their fixed-income portfolios,
although the more recent run-up in rates during the second quarter of
2013 significantly diminished those positions. However, low interest
rates will continue to pressure life insurers' earnings, as interest
rates are expected to remain at or near historic lows for the
foreseeable future (i.e., likely beyond 2015).
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=218077&AltSrc=26.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS
[ Back To Technology News's Homepage ]