Contents
- Cover
- Editors Desk: Independent Agents and Captive Insurers
- Contents: Independent Agents and Emerging Leaders
- Calendars: Insurance Industry Events and Economic Calendar
- Executive Changes: New Roles and Retirements
- Executive Changes: Global Leadership Roles and Web Traffic
- Masthead Forestay and Insurance Marketing
- Insurance Marketing: Data Analytics and Social Media
- Risk Adviser: Homeowners Insurance and Agent Counsel
- Issues and Answers: Specialty Coverage and Home Health Care
- Issues and Answers: Home Health Care and Emerging Risks
- Captives: Ratings Criteria Methodology
- Captive Insurers Ranking and Cell Captives
- Cell Captives and Annuity Surrenders
- Annuities: Surrenders and Premium
- Asset Management: Life Insurers and Offshore Reinsurers Reliance
- Asset Management and Private Capital and Life Insurance
- Life Insurers and Private Capital and Asset Management
- Independent Agents: Insurers and Technology and Communication
- Independent Agents: Insurers and Relationship Strategy
- Independent Agents and India Non-Life Insurance
- India Insurers: Regulatory Oversight and Policy Wording Liberalization
- Bests Rankings: Multiperil Crop Insurers and Private Crop Insurers
- Emerging Leaders: Data and Analytics and Industry Advancement
- Emerging Leaders: Technology and Insurance Equalizer
- Emerging Leaders: Technology and Innovation
- What AM Best Says: January 1 Renewals and Moderating Trend
- What AM Best Says and Inland Marine
- Inland Marine: Pet Insurance and Travel Insurance
- Underwriting and Loss Control: Catastrophic Events and Hotel Insurance Risk
- State Rate Filings: New Jersey Homeowners Rate Hike and New Jersey Homeowners Multiperil
- Bookstore: Company History and Innovation and Leadership
- Preferred Podcasters: Wisdom and Management Tips and Insurance Focused Podcasts
- Preferred Publishers: Special Report and Insurance Talent and Innovation and Growth
- Trending Bests News and Trending Bests Research
- AM Best Webinars and Briefings and AM Best TV and Audio
- Industry Research: London Market Future and Enhanced Underwriting
- Bests Credit Ratings Actions: Americas Life Health and Property Casualty
- Bests Credit Rating Actions: Holding Companies and Financial Strength Ratings
- Bests Credit Rating Actions and Corporate Changes
- Corporate Changes and Insurance Professional Resources
- Artificial Intelligence and Masthead Backstay
- Back Cover
YOUR NICHE MAY BE SMALL
BUT PROTECTING IT IS A BIG DEAL.
CONTRACTING
ENVIRONMENTAL
EXCESS
HOSPITALITY
MANUFACTURING
REAL ESTATE
RETAIL
Often, it’s the small things that need the most protection from outside forces. That’s
why PHLY Excess & Surplus Solutions offers coverage for even the smallest niches like
plumbing, taverns, machine shops, environmental contractors, commercial real estate,
vacant properties, manufacturers, and flea markets. Even landscaping. PHLY E&S
Solutions. Uniquely packaged to make a big difference, even in your small niche.
800.873.4552
PHLY.
COM
Philadelphia Insurance Companies is the marketing name for the property and casualty insurance operations
of Philadelphia Consolidated Holding Corp., a member of Tokio Marine Group. All admitted coverages are written by
Philadelphia Indemnity Insurance Company. Coverages are subject to actual policy language.
SPECIAL ADVERTISING SECTION
SPECIAL ADVERTISING SECTION
Issues & Answers: Specialty Coverage
Home Health Care Surging
Tony Canci, Vice President of Underwriting
- Human Services at Philadelphia Insurance
Cos., said the home health care sector is poised
for growth in the years ahead. “Ten thousand
people turn 65 each day and will continue to do
so until the end of this decade, so you can see
why there’s such optimism in the growth for this
space,” he said. Following are excerpts from an
interview.
What are the benefits of working with PHLY?
There’s been a bit of instability within the marketplace for
home health care agencies. PHLY has been writing this class
of business for close to two decades now, which has given us
the expertise in risk management, claims and underwriting to
provide and continue to provide the best level of service we can
to our clients in the years to come. PHLY has seen continued
growth in our home health care book of business, both from
startup home care agencies as well as existing providers, and we
expect that trend to continue as the years progress.
What are the challenges the home health care industry
faces?
With the expected growth, staffing shortage is, by far, one of
the biggest challenges. Caregivers’ wages are often on the
lower end of the scale despite the physical challenges and
sometimes unpleasant job responsibilities they need to carry
out. This leads to burnout, and turnover in this space is very
high. There are also claims where there is a less-than-qualified
or under-trained employee providing care that resulted in injury
to the client. Higher reimbursement rates in this space may help
potentially close the staffing shortage by attracting more talent
to this industry with increased wages and benefits.
What are the emerging risks within the home care
industry?
One of the biggest emerging risks in this industry is technology.
In the home, we’re seeing cameras, wearables, tablets, and
other health or life-saving devices come into play. These devices
certainly have their benefits but also present liability challenges
from patient privacy to data security and other HIPAA-related
violations. We’re also seeing home care agencies now exploring
ways to partner with Uber Health to incorporate ride-sharing into
their service offerings. From an insurance standpoint, this could
shift liability away from auto and into other lines of business,
such as general liability and professional liability.
Tony Canci
Vice President of Underwriting – Human Services
Philadelphia Insurance Cos.
“People want to
stay in their home
as long as possible,
so when you focus
on the cost of care—
home care versus
facility-based care—
it’s a no-brainer.
Home-based care
is a much more
affordable way to
provide care than
facility-based care.”
Visit the Issues & Answers section at
bestsreview.ambest.com
to
watch an interview with Tony Canci.
How will AI factor into the home care industry?
Data, analytics and predictive analytics will play a critical role in
the home care space as we move forward. A few areas where AI
could provide efficiencies is scheduling coordination, creating
personalized care plans, and maybe even predicting health issues
before they become problematic. One example where AI could
come into play is in a situation where a caregiver gets an alert on
a device that detects a client who is a fall risk is about to get up. In
this situation, the caregiver might be able to quickly maneuver over
to the client before the client gets up and has the time to prevent
the fall. This type of technology can certainly add immense value
and benefit to this space by reducing the number of slips and falls,
which is, by far, the No. 1 claim scenario we see in this space. The
real question is with liability. Where does liability fall when it comes to
the analysis and predictive analytics when it’s faulty, or inaccurate,
or insufficient? Is it the software provider, is it the caregiver, is it
the home care agency, or is it another third party? While I don’t
anticipate AI to replace caregivers, it will create efficiencies in this
space and possibly help with the labor shortages.
Share this edition at
https://bestsreview.ambest.com/issuesanswersarchive.html
.
BEST’S REVIEW • MARCH
19
AM Best Reviews Potential Changes to
Ratings Criteria Methodology for
Fast-Growing Captives Categories
20
Potential revisions to
Alternative Risk Transfer
criteria may affect assessments
of captives, risk retention groups, self-insurance funds and cell companies.
by Terrence Dopp
M Best is proposing revisions to its
Alternative Risk Transfer
criteria, which forms
part of its methodology used for rating
captives, risk retention groups, self-insurance funds
and cell companies, in response to evolving market
dynamics and developments in structuring and the
use of cell companies.
More significant updates to the criteria center
around the approach used for rating protected cell
company structures, said Myles Gould, senior director,
credit rating criteria, research and analytics at AM Best.
A
Terrence Dopp
is a senior associate editor. He can be reached at
terry.dopp@ambest.com.
BEST’S RE
V
IEW
•
MARCH
Cell captives have grown as a risk management
tool for organizations, since they have lower
funding and fewer regulatory requirements than
single-parent captive insurance companies, industry
experts say.
Gould and Mathilde Jakobsen, senior director of
analytics at AM Best, discussed changes during the
recent
AM Best’s Briefing — Captives & Cell Companies:
Revisions to “Alternative Risk Transfer (ART)” Criteria
,
which gave an overview of AM Best’s approach to
rating captives and discussed the proposed revisions.
Other changes largely relate to the refinement
of the existing criteria and analytical considerations
applicable to ART entities, Gould said. These
Captives
“The criteria revisions are not expected
to lead to rating changes for currently
rated entities given that AM Best is not
fundamentally changing its approach to
rating single-parent and pure captives,
where this criteria is mostly used.”
Myles Gould
AM Best
include revisions in the areas of letters of credit,
parent and holding company analysis, and operating
performance considerations, he said.
“The draft update also includes a proposed name
change of the criteria to
Rating Captives and Other
Alternative Risk Transfer Entities
to make it clearer
that this is the criteria used for rating captives and to
better align with other AM Best specialty criteria,”
said Gould.
“The criteria revisions are not expected to lead to
rating changes for currently rated entities given that
AM Best is not fundamentally changing its approach
to rating single-parent and pure captives, where this
criteria is mostly used,” he said.
The proposed revisions include definitions of
a variety of different types of cell structures and
outlines the approaches to rating such cell structures,
relative to their different features, Jakobsen said.
Unincorporated cell companies are companies
composed of a number of individual unincorporated
cells with only the UCC as a whole being an
incorporated legal entity. For UCCs, ratings will be
assigned only to the UCC as a whole, and based on
its “weakest link,” Jakobsen said.
Conversely, incorporated cell companies are
companies composed of a number of cells where
each cell is a separate incorporated legal entity that
holds its own insurance license, issues policies, and
enters into transactions with third parties. For ICCs,
ratings can be assigned to one or more of the ICs
in the structure assuming that they fall under this
definition.
“To determine if an IC can be rated, a review
of its domicile will be important,” said Jakobsen.
“It’s not always straightforward to determine which
definition a structure falls under, as the legalities and
language used vary by domiciles. We may use third-
party legal reviews to ensure that the requirements
are met.”
New European captive domiciles are seeing
growth in company formations, including entities
that redomicile from other jurisdictions, AM Best
said in a recent Best’s Market Segment Report
,
New Domiciles Are Changing the Landscape for the
European Captive Insurance Segment
.
Leading the list of European captive domiciles
was Guernsey, with 199 captives at the end of
2023. France is the fastest-growing European
domicile with 15 captives licensed at the end
of 2023, and at least three more in 2024 and
others to follow this year. The growth in captive
formations in France follows the introduction of
new regulations to encourage new entities, and
insurance experts say other European nations are
following suit.
Vermont was the leading domicile for AM
Best-rated captives in 2023, ahead of Bermuda;
Washington, D.C.; Barbados; and the Cayman
Islands. Global single-parent captives represent
the largest share of AM Best-rated captives at
30.4%, followed by risk retention groups at 21.2%,
according to the Best’s Market Segment Report
Growing Captive Insurance Market Highlights Risk
Management Expertise
.
The evolution of captives as risk transfer vehicles
has made them accessible to small and medium-size
enterprises in the form of group captives, RRGs, and
protected cell facilities, the report said.
AM Best TV
Scan to watch
AM Best’s Briefing —
Captives & Cell Companies: Revisions to
“Alternative Risk Transfer (ART)” Criteria
.
BEST’S REVIEW
•
MARCH
21
Best’s Rankings
Largest Published, Rated Single-Parent Captive Insurers – 2025 Edition
Ranked by 2023 gross premiums written.
(US$ Thousands)
Rank
Company
AMB#
Ultimate Parent Name
Solen Versicherungen AG
Shell plc
Vine Court Assur Incorporated
Kroger Co
Nissan Global Reinsurance, Ltd.
Nissan Motor Co., Ltd.
Dorinco Reins Co
Dow Inc.
Jupiter Ins Ltd
BP p.l.c.
Agrinational Ins Co
Archer Daniels Midland Company
Kot Ins Co AG
Petroleos Mexicanos
Noble Assur Co
Shell plc
Palms Ins Co, Ltd
NextEra Energy, Inc.
Queen City Assur, Inc.
Kroger Co
Amer Road Ins Co
Ford Motor Company
Greenval Ins DAC
BNP Paribas SA
AES Global Ins Co
The AES Corporation
Castle Harbour Ins Ltd
Schlumberger Limited
Eni Ins Designated Activity Co
Eni S.p.A.
Spirit Ins Co
Phillips
Stonefort Reins S.A.
ACS, Actividades de Construcción y Serv
Stellar Ins, Ltd.
Saudi Arabian Oil Company
Enel Ins N.V.
Enel Spa
Quanta Ins Co, Inc.
Quanta Services, Inc.
Harrington Sound Ins Ltd
Schlumberger Limited
Toyota Motor Ins Co
Toyota Motor Corporation
GreenStars BNP Paribas S.A.
BNP Paribas SA
PMG Assur Ltd.
Sony Group Corporation
Hamilton Ins Corp
Bank of New York Mellon Corp
Sooner Ins Co
ConocoPhillips
COSCO SHIPPING Captive Ins Co Ltd
China COSCO SHIPPING Corporation Limited
Natl Grid Ins Co (Isle of Man) Ltd
National Grid plc
Delvag Versicherungs-AG
Deutsche Lufthansa Aktiengesellschaft
Ally Intl Ins Co Ltd.
Ally Financial Inc.
1
Insurance Service Revenue
Source:
and AM Best research; data as of Nov. 22, 2024.
Visit https://news.ambest.com/research/ for a listing of Best’s Rankings.
Country of
Domicile
Switzerland
United States
Bermuda
United States
Guernsey
United States
Switzerland
United States
Cayman Islands
United States
United States
Ireland
United States
Bermuda
Ireland
United States
Luxembourg
Bermuda
Netherlands
United States
Bermuda
United States
Luxembourg
Bermuda
United States
United States
China
Isle of Man
Germany
Bermuda
Gross
Premiums
Written
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Capital &
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Connect with
AM Best
LinkedIn
YouTube
ambest.com/corplinkedin
ambest.com/ratingslinkedin
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@AMBestCo
@AMBestRatings
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Multimedia Channels
Facebook
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@AMBestcompany
BEST’S RE
V
IEW
•
MARCH
Captives
25.MK009A
Lower-Cost Cell Captives Emerge as
Groups’ Risk Management Program
Cell captives are a growing avenue for organizations looking to protect themselves
against risk. Their flexibility and low capital needs are seen as attractive features
for companies that do not want to set up a traditional single-parent captive.
by William Borden
usinesses are increasingly turning to cell captives
as a risk management tool, given their reduced
regulatory requirements and lower capital demands
than traditional captives, insurance experts say.
Small and medium-size enterprises are seeing cell
captives assume a greater proportion of their business.
Domiciles are allowing cell captives to serve as an
interim step before forming a single-parent captive,
a stand-alone company to manage risks that has seen
widespread use as a self-insurance tool.
“A lot of MGAs are using them quite effectively
to get different capacity, reach reinsurance markets
and just broaden out their horizons a little bit,” said
Alexandra Gedge, a senior captive consultant at Hylant
Global Captive Solutions.
Dan Teclaw, director at AM Best, said the hard market
for insurance and reinsurance since 2018 has spurred
the overall use of captives for organizations to manage
risk. Businesses often form captives as a way to obtain
insurance when it’s difficult to manage the markets.
“In hard markets, it’s more difficult for companies
to get insurance or reinsurance for the lines that they
B
William Borden
is managing editor. He can be reached at
william.borden@ambest.com
.
might typically cover, or customizable coverages, and
they think they can do it more efficiently themselves,”
Teclaw said.
Of the captives formed at WTW last year, Jason
Palmer, the company’s director of captive and insurance
management solutions, said 20% were cell captive
programs. “That has increased year over year and we
would expect that trend to continue,” he said.
Gedge said she has seen reports of 25% growth for
the formation of cell captives in 2023.
The Incentive for Captives
Cell captives operate as insurance companies under
a sponsor company that offers management services
on behalf of an organization that is looking to manage
its risks. Cell captives come in a few different forms,
depending on where they are based, including an account,
an unincorporated cell, a series or an incorporated cell. All
have varying degrees of independence, protections from
liability and ties to their sponsor.
The analogy to distinguish the difference between
a single-parent captive and the cell captive is the
difference between a home and a condominium, where
the structure is actually owned by another party.
When cell captives were first allowed under the law,
BEST’S REVIEW
•
MARCH
23
Cell Captives
“Property is a hotbed of activity in
the U.S. right now and is a big area of
interest for our clients.”
Claire Richardson
Hylant Global Captive Solutions
24
they were primarily used as a one-transaction facility,
Palmer said. “What we’re seeing more is organizations
that are using a cell captive akin or similar to how one
may use a pure captive, but just in the format of a cell
captive,” Palmer said.
“At least initially, it seems more daunting to them
to go into a single-parent captive or pure captive and
therefore, they choose to utilize a cell facility to get the
program kicked off, evaluate how well it works within
their organization, and then make a decision whether
they will continue with a cell captive or move on to a fully
owned, single-parent captive at a later date,” Palmer said.
Gedge noted that companies that may have a
market requirement for coverage and the cell captive
can offer “a formalized response because they don’t
necessarily want to buy from the market and what’s
being sold in the market isn’t necessarily appropriate.”
Jeffrey Simpson, partner at Womble Bond
Dickinson, said his firm’s captive practice is dedicating
about half of its time to establishing cell captives. In the
past, cell captives often were set up “as a place where
you put a quick problem you need to solve,” such as a
difficult insurance renewal, he said.
While property coverage is seen as a big driver
among the types of coverage used by cells, Simpson
said they are becoming more sophisticated to include
casualty, workers’ compensation and other coverages as
long as the level of premium paid to the captive or the
financing to support the cell is covering the risk.
“Property is a hotbed of activity in the U.S. right
now and is a big area of interest for our clients,” said
Claire Richardson, senior captive consultant at Hylant
Global Captive Solutions.
Cell Captives’ Limitations
The use of cells and their walled-off assets and
liabilities from other cell owners has not yet been tested
in court, Simpson said. If a cell owner wants absolute
certainty that its assets and liabilities will be segregated,
BEST’S REVIEW
•
MARCH
incorporating itself is one approach, Simpson said.
Assuming the formalities are followed, he said,
there is a low likelihood that the boundaries between
cells would not be respected. Simpson said that judges
in most jurisdictions will understand and respect the
segregation of assets and liabilities. But, there is nothing
stopping a lawsuit from being filed in a jurisdiction
that does not provide for cell structures and where
those rules might not be followed, he said.
“The matter of domiciles is important because you
want to have both the infrastructure and courts that
are sophisticated enough to understand the context
of and the legal issues around these kinds of captives,”
Simpson said.
Domiciles have a role in the tax implications of
using captives, according to Allan Autry, tax partner at
Johnson Lambert LLP. On state tax implications, all
but 10 states charge premium tax in lieu of income tax.
In the 10 states that charge both, there could be credits
against income tax for premium taxes paid or vice
versa, as each state has its own nuances.
Other considerations from the insured perspective
is self-procurement tax. “The home state of the
insured versus the registered domicile(s) of the captive
insurance company can lead to self-procurement
tax consequences,” Autry said in an email regarding
recently updated IRS regulations about captives.
AM Best is in the process of updating its
Alternative
Risk Transfer
criteria to include the capability to rate cell
captives.
While lower costs and fewer rules around
governance are seen as the draw for using a cell captive,
Gedge said there is a tipping point where the costs of
running a cell, such as audit and actuary costs, match
those of owning a captive.
Luckily, “for the most part, captives do a very good
job of not failing,” Gedge said. “It’s very rare to see
a captive not meet its kind of debtors and creditors
requirements and its insurable requirements.”
Cell Captives
Market Watchers: Annuity Surrenders
May Continue Their Momentum in 2025
Surrender benefits increased 19% year-over-year through the second quarter
of 2024, according to a Best’s Special Report.
by Terrence Dopp
nnuities boomed in the United States in recent
years as equity markets, higher interest rates
and an aging population all contributed to
record demand.
Some of those sales were derived from people
with older contracts signed in an era of lower rates
who surrendered them to purchase newer ones that
paid more. Timing could keep that momentum
going into 2025.
The U.S. Federal Reserve began raising interest
rates in March 2022 to combat rising inflation.
Interest rates nearly doubled after almost a decade
at historical lows. That also flipped the relationship
between long- and short-term rates for a period,
which encouraged the sale of products with shorter
terms.
Mike Downing, executive vice president and
chief operating officer of Athene Holding Ltd., said
surrenders are unlikely to meaningfully slow down
if short-term rates decrease in 2025. “Surrenders are
a function of the terms of the contracts,” Downing
said. “A common assumption is that rates are behind
A
Terrence Dopp
is a senior associate editor. He can be reached at
terry.dopp@ambest.com.
surrender activity, but it’s primarily a question of
when surrender charges end.”
Crediting rates, the amount of interest insurers
pay on an annuity contract, can vary widely
depending on the product, provider and length of
the contract. Most annuities currently bring rates
ranging from about 4.5% to nearly 6% in the case
of long maturities.
Using a smaller window of time to quantify the
uptick, surrender benefits increased 19% year-over-
year through the second quarter of 2024 while
individual and group annuity premiums increased
by 21% during the period, according to a Nov. 5,
2024, Best’s Special Report,
Smaller Companies Face
Cash Flow Crunch From Uptick in Surrenders.
That
report found surrender benefits topped $100 billion
for six of the last seven quarters.
Kate Steffanelli, an associate director at AM Best,
said the impact will be different for large companies
compared to smaller annuity providers and run-off
firms that are less able to replace the business.
“They surrender and then they get a better rate,”
Steffanelli said, referring to consumers. “Many
times, they’re going back to the same carrier. What
we’re seeing for the most part is that carriers have
BEST’S REVIEW
•
MARCH
25
Annuities
“I do think we’ll see a lot of the annuity
business stay in the annuity ecosystem.
I think the money’s going to stay in.
You’ll likely see a shift to longer-duration
products and lock in.”
Keith Golembiewski
LIMRA
been replacing this with just as much new business
so they’re not being impacted.”
That’s where so-called 1035 exchanges come into
play. They allow people to switch life insurance,
annuities and endowments into similar vehicles
without incurring a tax liability.
The three-year annuity contracts sold when rates
first began to rise in 2022 are set to exit the pre-
contracted period. But new money that flooded into
the annuity market with rising rates is unlikely to
leave the insurance system. “After holding an annuity,
consumers become familiar with the benefits they
provide and often redeploy their assets into a new
contract,” said Downing. “The money that came in is
likely to stay within the insurance ecosystem.”
When contracts exit the surrender charge period,
consumers often transfer the funds into another
annuity to maintain the benefit of tax deferral.
Product mix also could see a shift, as years
of those higher rates drove customers to fixed
annuities. If rates are cut drastically, it will likely
bring a rush of surrenders in the first half of the year,
followed by a period in which people hold on to
their older annuities, said industry group LIMRA.
The organization forecasts U.S. retail annuity sales
are on track to exceed $1.1 trillion from 2022 to
2024, though this year could see the sale of fixed-
rate deferred annuities and fixed indexed annuities
retreat as interest rates recede.
Market conditions and demographics remain
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250
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%HJLQQLQJ
200
150
100
50
0
+LJKHU,QWHUHVW5DWHV
0
2
4
6
8
10
12
14
16
26
Surrenders
DPW
Note: Premium includes individual life, individual annuity, and group annuity.
Source:
from
Best’s Special Report: Smaller Companies Face Cash Flow Crunch From Uptick in Surrenders
, published Nov. 5, 2024.
Annualized Surrenders % of Reserves
BEST’S REVIEW
•
MARCH
Annuities
Annualized Surrenders as a % of Reserves
($ Billions)
YoY 2Q24 Surrenders vs. Direct Premium Growth
-20
0
20
40
60
80
100
120
140
160
Surrenders
Notes: For companies with surrenders >$1 billion.
Premium includes individual life, individual annuity, and group annuity.
Source:
from
Best’s Special Report: Smaller Companies Face Cash Flow Crunch From Uptick in Surrenders
, published Nov. 5, 2024.
Premium
favorable for the annuity market but after rising
rates propelled the growth of 2023 and 2024, a
decline in interest rates will stymie the growth of
fixed annuity products in 2025, LIMRA said.
Keith Golembiewski, LIMRA’s assistant vice
president and director of annuity research, pointed
to the composition of the industry’s sales of the last
few years as being important to 2025’s patterns.
“Probably two-thirds of that was new money,” he
said. “The remainder, of course, would be 1035
exchanges. So, we did see it from a dollar amount
that, yes, it grew. You did see movement of business
that was done before 2022.”
Ben Johnson, actuarial data scientist, Milliman,
said the overall trend will depend on economic
conditions and any shift in product design.
Surrender rates may diverge between products
as rates shift, he said. “Lower surrender rates can
result in greater assets and more stable fees but also
increased liabilities and required capital,” Johnson
said. “The financial impact of high surrender rates
depends on the affected business segments, their
contract life-cycle stage, and whether their future
expected liabilities outweigh future expected fees.”
Golembiewski said while the dollar amounts
of surrenders have risen in the recent past, from a
percentage standpoint they haven’t increased at the
same level.
Also important to note was, since 2022, annuities
providers have sold contracts with shorter terms, he said.
As the yield curve and rates normalize, that could
change and shift which contracts are expiring and
which become surrender candidates.
“I do think we’ll see a lot of the annuity business
stay in the annuity ecosystem,” Golembiewski said.
“I think the money’s going to stay in. You’ll likely
see a shift to longer-duration products and lock in.
You really don’t know what the Fed is going to do.”
Some rate cuts could be on tap but exactly the
severity and timing of those reductions remain
unclear, he said. G
olembiewski said President
Donald Trump is expected to be pro-business and
to have a light touch with new regulations, which
could help with the investment environment for
annuities. As far as potential headwinds in 2025,
he listed the potential for rate increases along with
the possibility of a recession. Also, as “not likely but
possible,” he noted complexity of products—for
instance, adding features consumers don’t want or
need, making it harder to sell contracts.
As for additional tailwinds, he cited the aging
population of the United States and that built-in
bonus of previous business done in the past.
“If rates are cut maybe a couple of times, maybe
overall we see a hundred basis points reduction by
the end of the year. That’s where I think surrender
activity would slow down,” Golembiewski said.
“Maybe it’s not as attractive, maybe you start seeing
that business done in 2022 and maybe it makes
sense to leave it where it is.”
BEST’S REVIEW
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MARCH
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