Accounting standard dampens life insurers’ interest in high-interest bonds

May 1, 2023 by Steven A. Morelli

After a decade and a half of hoping, life insurance companies are finally seeing an increase in interest rates that improves yield on assets they can purchase, but carriers might be afraid to exchange their low-rate bonds for higher-rated ones because of an accounting standard.

As rates dropped after the 2008 economic crash, insurers could sell bonds for a gain before their maturity and count as a plus in its interest maintenance reserve (IMR), an accounting standard that helps carriers smooth their annual income across market conditions, according to a recent Conning report. IMR is a reserve held according to standard accounting principles to deal with fluctuations in the interest rate.

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Originally Posted at InsuranceNewsNet on April 25, 2023 by Steven A. Morelli.