How Financially Sound Are Your BOLI Investments?
Our recent study of Bank Owned Life Insurance (BOLI) investments by the largest 150 U.S. banks showed that the average exposure to this asset class was 1.5% of total assets and 14% of common equity. While BOLI is by no means a sizeable asset for most banks, 10% of banks had exposure that ranged from 23% to 32% of total bank common equity – a potentially painful hit to capital should this investment not perform as expected.
The Spectrum Approach to Insurer Financial Oversight – Life
Adopting a binary approach to the consideration of an insurer’s financial strength; i.e. that the carrier is either solvent (good) or insolvent (bad), is a common and potentially costly due diligence mistake. As historically not very many life insurers become insolvent (though more do so in the property & casualty and medical health insurance sectors) , distributors of their products may conclude that carrier financial oversight is therefore either unnecessary or something to be passed over lightly. While we agree that insolvency always equals a bad outcome, it does not follow that all solvent companies are necessarily “good.”
The Spectrum Approach to Insurer Financial Oversight
Adopting a binary approach to the consideration of an insurer’s financial strength; i.e. that the carrier is either solvent (good) or insolvent (bad), is a common and potentially costly due diligence mistake. As historically not many insurers become insolvent (though more do so in the property & casualty and medical health insurance sectors) , distributors of their products may conclude that carrier financial oversight is therefore either unnecessary or something to be passed over lightly. While we agree that insolvency always equals a bad outcome, it does not follow that all solvent companies are necessarily “good.”
Principal Reinsures $25 Billion of Fixed Annuity and Universal Life Business
On January 31, 2022, Principal Financial Group, Inc. (PFG) entered into an agreement with an affiliate of
Sixth Street Partners (SSP) and its insurance platform Talcott Resolution (Talcott), to reinsure a total of $25
billion in policy reserves (and accompanying investments), which relate to fixed annuities and universal life
insurance with secondary guarantees.
Lighthouse Property and Safepoint Insurance Go On Offense
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Allianz Reinsures $35 Billion of Fixed Indexed Annuities
On December 3, 2021, Allianz SE (Allianz) announced that its principal U.S. life insurer, Allianz Life
Insurance Company of North America (ALNA), entered into separate agreements with Talcott Resolution
Life Insurance Company (TRL) and Resolution Life Group Holdings LP (Resolution Life) to reinsure a total
of $35 billion in fixed indexed annuity reserves.
Manulife Agrees to Sell Block of Legacy Variable Annuities
On November 15, 2021, Manulife Financial Corporation (MFC) reached an agreement with Venerable
Holdings Inc. (VH) to reinsure roughly $22 billion (account values) in variable annuity business issued by
MFC’s principal U.S. life insurer John Hancock Life Insurance Company (USA) (JHUSA).
NAIC Updates Risk-Based Capital Bond Factors
In June 2021, the National Association of Insurance Commissioners (NAIC) adopted new factors related to the required capital for bond holdings for the Risk-Based Capital ratios of Life, Property & Casualty, and Health insurance companies. Details on the update are outlined below:
Life Insurance Industry in Transition: 2009 through 2021
In the years since the financial crisis a sizeable number of insurers have executed (or are about to execute) significant changes in their business operations in the U.S. life, annuity, and/or health insurance markets. These have included the following:
FedNat Insurance Group – Exceptional?
Last week, Demotech Inc. issued a release affirming its Financial Stability Ratings (FSR) of A for the three insurance subsidiaries of publicly traded FedNat Holding Company: FedNat Insurance Company (FIC), Maison Insurance Company, and Monarch National Insurance Company. It read as follows: