Moody’s has maintained its stable outlook for the U.S. life insurance sector in 2020 amid strong capital, and despite the significant challenges of the ongoing low interest rate environment.
The U.S. life insurance sector’s strong capital position, as well as its focus on adapting products to the low interest environment and also investments in technology, has resulted in Moody’s maintaining its 2020 stable outlook for the industry.
However, the ratings agency warns that macroeconomic conditions could add pressure to the financial performance of life insurance companies. Furthermore, the ongoing lower for longer interest rate environment remains a challenge for life players, and Moody’s notes that this is still a significant headwind.
“Life insurers capitalization remains strong, supported by robust equity markets, and investments are well managed with diversified portfolios comprised mostly of high quality fixed income investments.
“However, insurers are susceptible to the negative impacts of falling ratings or rating migration and increasing allocations to higher risk assets in a slowing economy,” said Bob Garofalo, Moody’s Vice President.
The ratings agency also highlighted the increased investment in and use of technology by life insurers in the U.S., with many leveraging technology-based solutions in an effort to remain relevant and attractive in a constantly evolving marketplace. According to Moody’s, life insurers are also investing more in automated underwriting to lower costs and improve the application process experience for customers.
As well as the challenges of low interest rates, Moody’s also warns of uncertainty across the life insurance industry as a result of regulatory and accounting pressures.
