US Life Insurers See Return Pressure, Manageable Losses in 2022
December 14, 2021 by Fitch Ratings
Fitch Ratings-New York-07 December 2021: The neutral sector outlook for U.S. life insurers reflects improvement in the macroeconomic environment over the past year and strong industry balance sheet fundamentals, which are expected to persist in 2022. However, sustained low interest rates, the increased role of alternative investment managers and accounting changes will have long-term credit implications for the life insurance industry, Fitch Ratings says.
Ongoing concerns regarding the economic fallout from the coronavirus pandemic have abated given continued progress on vaccination rates and ongoing monetary and fiscal support, which greatly contributed to the relatively benign credit environment and modest credit losses for U.S. life insurers.
Pressure on financial performance of legacy in-force business from low interest rates is not expected to abate in the near term. To the extent that life insurers overreach for yield in various ways due to low interest rates and increase their vulnerability to a large market shock would be viewed negatively Exposure to commercial real estate-related assets remains a downside risk amid relatively benign credit trends that are expected to continue into 2022. However, potential losses will be manageable in relation to earnings and capital.
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