In addition to the unbundled aspect of universal life and other non-variable
interest sensitive life plans of the day, the market interest rate credited to many of these plans was a big driver of UL's success.
AM Best has revised the outlook on the insurer's ICR because of its concerns related to the impact of spread compression on the group's
interest sensitive reserves due to the low interest rates in the country.
1 million) in
interest sensitive investment policies - which he suggested had allowed insurance companies to take in deposits in the guise of insurance premiums - controlled by the three companies; Traditional and equity-linked policyholders would not be affected by the temporary freeze on interest-sensitive policies and should continue to transact business as usual at their respective institutions.
This disaggregation of stock prices shows a surprising lack of excess response by stocks that are usually considered
interest sensitive.
Borrowing with government-guaranteed debt may be
interest sensitive, but the guarantees have the effect of preempting resources from those without access to riskless credit.
These factors are partially mitigated by spread compression in COUNTRY Financial Life Group's blocks of
interest sensitive business with high guaranteed rates, elevated exposure to commercial mortgages, lower rates of return relative to its peer groups and exposure to geographic concentration risk, in which over 60% of direct premiums originate from Illinois.
The negative outlook on the insurer's ICR factors in the rating agency's concern related to the impact of spread compression on the group's
interest sensitive reserves due to the low interest rates in the country.
Although the demand for housing appears to have been no less sensitive to the cost of capital over the 1980s, expenditures on residential construction may nevertheless have been less
interest sensitive because disintermediation-induced episodes of credit rationing were absent during the 1980s.
Factors that could lead to positive rating actions for GLAC include increasing positive earnings trends, greater profitable premium and revenue diversification achieved by reducing the high concentration in
interest sensitive liabilities and gradual reduction in exposure to structured securities.
M2 has not been affected in this way, but it remains sufficiently
interest sensitive that it is difficult to judge the import of a path for this aggregate without reference to the surrounding economic situation.
Partial offsetting rating factors are Security Benefit Life's rapid growth and increasing exposure to
interest sensitive fixed-indexed annuities, its significant holdings in mortgage-backed securities and affiliated assets and the new business strain that could dampen its statutory operating results as a result of its continuing new business growth.
Borrowing with government-guaranteed debt may be only partly
interest sensitive, but the guarantees have the effect of preempting resources from those without access to riskless credit.
