AM Best revised its market segment outlook from negative to stable as the segment saw a number of improvements including gains in capital markets and diversified income streams that helped offset the impacts of the pandemic on mortality.
In his new Best Market Segment Report, âMarket segment outlook:
The low interest rate environment remains, but has fueled acquisitions of old blocks of business, including variable annuities, retirement risk transfer blocks and interest rate sensitive blocks. According to the report, the current market dynamics allow a restructuring from the balance sheet to the liabilities. Insurers benefit from lower costs of capital and strong liquidity, which will position them well as the economy improves and if interest rates rise and inflation declines.
Several pre-COVID-19 pre-pandemic trends have accelerated, including the pivot of life / annuity insurers to fee-based business models that are less sensitive to movements in capital markets. Although such changes take time to fully materialize, the formation of new reinsurers, most often private equity-backed, has allowed a more rapid inflow of capital into the industry. This has also intensified the competition for the existing business books available. AM Best sees the additional capital as a positive, while also acknowledging a still developing business model that seems riskier but with higher yielding assets.
While the life annuity segment faces some hurdles as it looks to 2022, including continued COVID-19 cases and death claims, as well as inflationary headwinds, AM Best believes carriers will be able to meet these challenges due to improvements in capitalization, profitability and business risk management practices.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=315385.
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AM Best senior analysts to examine the 2022 market segment outlook for the
To view the current outlook for Best’s market segment, please visit http://www.ambest.com/ratings/RatingOutlook.asp.
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Source: AM Best