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S&P sees possible longer-term ratings impact if US life insurers won't be able to adjust to new DOL rule

Standard & Poor's Ratings Services does not expect to changeits ratings on U.S. life insurers as a result of the Department of Labor's new fiduciaryrules, but sees potentialratings implications in the next couple of years depending on how life insurersadjust to the new regulation, according to an April 7 news release.

S&P credit analyst Beth Campbell said in the news releasethat the new rule subjects variable annuities and fixed-indexed annuity sales tonew compliance and liability rules, which could affect the sales of these annuitiesin the near term. Ratings changes can be triggered for insurers that won't be ableto adapt to the new rule and experience worsening market positions as the ratingagency could view their overall competitive position negatively.

The profit margins and credit quality of companies selling variableannuities and fixed-indexed annuities could suffer if they are not able to adaptto higher compliance costs and potential litigation liability, leading to a revisionof the rating agency's view of their operating performance if return metrics deterioratecompared to peers'.

Insurers with a balanced product portfolio and sophisticatedcompliance framework will be in a better position given the new paradigm, S&Pcredit analyst Deep Banerjee said in the news release.

S&P Ratings and GlobalMarket Intelligence are owned by McGraw Hill Financial Inc.