Moody’s downgrades U.S. life insurance outlook to ‘negative’
April 15, 2020 by Insurance Forums Staff
The outlook for the U.S. life insurance sector has been changed from stable to negative, owing to the unprecedented economic turmoil from the coronavirus pandemic amid the decline in U.S. Treasury rates and a higher likelihood of a prolonged low rate environment, Moody’s Investors Service says in a new report released April 1.
U.S. life insurers have been significantly challenged by lower-for-longer interest rates, particularly at the long end of the curve, a credit negative for the sector.
“Over time, we expect much of the impact of low rates will affect insurers’ earnings and reduce interest-sensitive product earnings because of spread compression, which is prevalent in the already sizable blocks of the industry’s liabilities at minimum guaranteed rates,” Moody’s Vice President Manoj Jethani says. “There is also the risk of more sizable charges on a GAAP and statutory accounting basis, as insurers review the viability of their long-term interest rate assumptions.”
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