February 20, 2018 09:45
Photo : Freepik
Despite a solid year of health insurance to u.s. in 2017, the rating agency A.M. Best maintains its negative outlook for the market to 2018, due to uncertainties in regulatory and economic.
As in Canada, the u.s. industry anxiously awaits the new rules, trustees sales practices. Uncertainty also on the regulations that surround the treatment of non-bank institutions which pose a systemic risk.
In addition, the impact of the approach in principle of the National Association of Insurance Commissioners (NAIC) remains uncertain, especially on the background of the tax reform.
Poor sales and the rapid rate of technological evolution also invite to tarnish the performance of the industry, » said the agency in its review in 2017, and his perspective 2018 in life insurance and annuities in the United States. The modest growth in sales of life insurance products traditional and declining sales of individual annuities have pushed insurers to focus their efforts on products that use advanced technology, and to anticipate the future regulations.
The rating agency stresses that usually slow to adapt, the industry is quickly gone in technology. Insurers will now be required to consolidate the progress and permeate their corporate culture, including through the regular updating of their technology. In addition, they will face competition from external firms, more flexible, more technologically advanced and amply capitalized. Finally, A.M. Best believes that the industry has had mixed success in the elimination of paper.
The recent increase in short-term interest rates could increase the competition of the certificates of deposit against annuity insurers. The differences between short-term rates and rates in the longer term are also at their lowest. Insurers are widely invested in long-term investments related to interest rates could see as well the performance of their portfolios suffer.
A.M. Best has observed a shift from insurers to mortgage investments (9.8% of total investments 11.5 %), while they have reduced the portion of bonds of 74.8 % to 73.1 %. They have also decreased their investments in the short term, but increased slightly the investment in shares.
Mitigate the risk
A.M. Best notes, however, that several insurers are able to mitigate the risk of their investment portfolios, and to get rid of old blocks of business in variable annuities, strong gourmet capital.