Moody’s has revised its outlook for the US life insurance sector to stable, following what it classifies as a strong US economic rebound in 2021.
This rebound is seen as being primarily driven by the improving health of individuals amid mass vaccinations, a factor which itself is key to enabling an improved operating environment for the sector.
The outlook shift comes a year after the coronavirus pandemic drove the shift to negative.
However, Moody’s does underline that the US life insurance industry remains challenged by the prospect of very low interest rates for a prolonged amount of time, which will continue to weigh on their investment and spread-derived income.
Furthermore, low interest rates have compelled life insurers to examine their business models via mergers, acquisitions and dispositions.
For some life insurers, Moody’s says the sale and/or reinsurance of business to buyers, which increasingly include private equity firms, provide solutions to these life insurers looking for a way out of volatile, interest-sensitive or underperforming annuity and life operations.
“Although the pandemic is still very much with us, significant progress in mass vaccinations across the US population is helping to bring the virus under control,” Moody’s Vice President Laura Bazer said.
“A growing economy boosted by substantial government stimulus and declining unemployment is good for life insurers, since this will put more disposable income in the hands of individuals, for whom life insurance policies and annuities are discretionary purchases.”
