Low interest rates and political unrest are two insurance industry challenges that life insurers and property-casualty companies say keep them awake at night.
Insurers place most of their funds in fixed-income securities, but returns have diminished since the financial crisis, according to MarketWatch.
Many insurers rely on investment income to contribute to earnings, which have depleted significantly, Robert Schimek, chief financial officer of New York, N.Y.-based Chartis, told MarketWatch.
Before the financial crisis of 2008, companies could expect a 10% return on coverage paid out in several years, called long-tail lines, even if it paid out as much in claims as it collected in premiums, according to Schimek.
Now insurers do not expect a 10% return on a four-year liability, Schimek said. Chartis has been selling fewer long-tailed coverage policies.
A “moderate” amount of inflation would be welcomed by the insurance industry to change the interest rate environment.
Some say political uncertainty makes matters worse for the insurance industry. Tax-policy uncertainty, accounting-regime uncertainty and regulatory uncertainty make insurers more cautious, Craig Mense, chief financial officer of Chicago, Ill.-based CNA Financial Corp., said.
Low interest rates cause sleepless nights among life, P-C insurers via IFAwebnews.com .
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