Interest-sensitive life premiums were on the upswing in 2015,with the U.S. life insurance industry reporting 21.7% annual growth in net premiumswritten. This followed a modest increase of 3.3% in 2014 and two straight yearsof declines in 2012 and 2013.
Thisdata comes from a supplemental section of annual statutory filings submitted tothe NAIC. Per theregulator's instructions, a life insurance product is interest-sensitive if it hasan "indeterminate product value from which specified periodic charges are deductedand to which specified periodic interest is credited at a rate not determined atissue."
In essence,these are products, such as universal life, where the policy has a cash value componentthat earns interest at a rate set periodically by the insurer.This can also include products such as traditional life policies with universallife riders and other interest-sensitive whole life policies, based on responsesgathered from industry participants for a prioranalysis. It can also encompass certain variable products, such as variableuniversal life policies.
The industryresults come amid a backdrop of persistently low interest rates, which is set tocontinue until September at least. The Federal Open Market Committee July 27 that it left ratesunchanged at its latest meeting and will continue to target a federal funds rateof between 25 basis points and 50 basis points.
The netpremium data can be volatile, however, depending on reinsurance and M&A transactionsthat a company might enter into. For instance, MetLife Inc. witnessed a 58.7% jump in 2015 only two yearsafter a 56.9% decrease in 2013.
Meanwhile,the largest writer, Lincoln NationalCorp., reported a decrease in interest-sensitive net premiums written.The decline was not as steep as in 2012, however, when net premiums written weredown 26.8%.
Lincolnexecutives have openly discussed their strategy to become less reliant on interest-sensitiveproducts. Mark Konen, president of the insurance and retirement solutions divisionof Lincoln Financial Group, said, based on a transcript of his remarks during a March conference, thatthe company began product portfolio repricing in 2011 to reflect the low interestrate environment. Prior to the company pivoting in this fashion, 64% of its lifesales had long-term guarantees, which compares to only 33% today, according to accompanying the presentation.
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