2021-11-01-奥纬咨询-Impact_of_Rising_Interest_Rates_for_Life_Insurers_11页_246kb

Summary of "The Impact Of A Rising Interest Rate Environment — Life Insurance"

• Executive Summary Overview: This report analyzes how rising interest rates affect life insurance companies, focusing on in-force retention, new business strategy, and third-party transactions. Rising rates present both opportunities and risks, necessitating proactive strategies to maintain competitiveness.

• Key Impacts:

  • In-Force Retention: Challenges arise with traditional products like whole life, where surrender rates may increase due to competitor offerings. Interest-sensitive products allow insurers to manage retention by adjusting credited interest rates, balancing profit retention against competitive pressures.
  • New Business Profitability and Product Design: Higher rates can boost short-term profits, but insurers must balance earnings retention with product competitiveness. Product redesign, such as lower premiums or enhanced benefits, is recommended to attract consumers in a changing market.
  • Reinsurance and M&A: Low rates historically drove reinsurance and M&A activity; rising rates may reduce appetite, but offshore arrangements could still support investment income. M&A timing and asset replacement risks are critical considerations.

• Action Items:

  1. Develop internal interest rate outlook.
  2. Inventory products and assess potential rate impacts.
  3. Prioritize actions based on inventory and assessment.
  4. Design business strategies to adapt to rising rates without undermining low-rate scenarios.
  5. Commit to ongoing monitoring and flexible responses.