Contents

  1. Cover
  2. Editors Desk: Risk and Artificial Intelligence and Cyber
  3. Contents: Commercial Risk and Life Impairments
  4. Calendars: Insurance Industry Events and Economic Calendar
  5. Executive Changes: New Roles and Retirements
  6. Executive Changes: Global Leadership and Web Traffic
  7. Masthead Forestay
  8. At Large: Global Life Market Growth
  9. Issues and Answers: Commercial Risk and Future Rate Impact
  10. Issues and Answers: Evolution and Commercial Risk
  11. Issues and Answers: Strategic Advantages and Captives
  12. Life Mutuals: Mutual Life Insurers and Dividend Boost
  13. Life Mutuals and Life Impairments
  14. Life Impairments: Impairment Trends and Line of Business
  15. ILS Market: Cat Bonds and New Capital and Sidecars
  16. Commercial Risk: Political Changes and Artificial Intelligence
  17. Commercial Risk: State Regulation and Social Inflation
  18. Commercial Risk: Emerging Risk and Cybersecurity
  19. Third Party Litigation: Lawmakers and Regulators and Funding
  20. Carbon Credit Fraud: New Insurance Facility and Fraudulent Activities
  21. Carbon Credit Fraud: Counterfeit Certificates and Technology
  22. Chemical Liability: Forever Chemicals and Risk Management
  23. Chemical Liability and Cyber Insurance Survey
  24. Retirements and National Council on Compensation Insurance
  25. Asia Pacific Insurance and New Energy Vehicle Boom
  26. Bests Rankings and Largest Asia Pacific Insurers
  27. Thailand Insurers and Malaysia Outlook
  28. Preferred Bloggers: Traditional Media and Podcasts and Social Media
  29. What AM Best Says: Sustained Growth and DUAE Market
  30. Underwriting and Loss Control: Air Ambulance Services and Risk
  31. State Rate Filings: North Carolina Homeowners Rate Hike and Approved Rate Filings
  32. Bookstore and App Store
  33. Preferred Podcasters: Mutual Insurance Community and Insurance Focused Podcasts
  34. Preferred Publishers: Revenue Growth and Hiring and Insurance Focused Publications
  35. Trending Bests News and Trending Bests Research
  36. AM Best Webinars and Briefings and AM Best TV and Audio
  37. Industry Research: Cyberrisks and Insurance Supply Chain
  38. Bests Credit Ratings Actions: Americas Life Health and Property Casualty
  39. Bests Credit Rating Actions: Europe Middle East and Africa and Holding Companies
  40. Bests Credit Rating Actions: Financial Strength Ratings and Issuer Credit Ratings
  41. Insurance Professional Resources and Industry Updates
  42. Artificial Intelligence and Masthead Backstay
  43. Back Cover
 
20-21 20-21

Beyond

Data

Commitment Beyond Numbers
Alternative
Markets
Enterprise Risk
Management
Legislative
Costing
Litigation
Support
Loss
Reserving
Predictive
Analytics
Pricing and Product
Management
Reinsurance
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Issues & Answers: Commercial Risk
The Strategic Advantages
of Captives
Aaron Hillebrandt, Principal and Consulting
Actuary, Pinnacle Actuarial Resources, said
diversification of risk is important—and a great
strategy. “A captive’s risk exposure is much
greater, naturally, for a single coverage, and
concentration of risk is much higher than in a
captive writing multiple coverages,” he said.
Following are excerpts from an interview.
Aaron Hillebrandt
Principal and Consulting Actuary
Pinnacle Actuarial Resources
What are the advantages for insuring exposures
through a captive?
Of course, the advantages and disadvantages of deploying
a captive solution will vary by sector or line of business. But
captives have a long and well-established track record as a good
defense to changing conditions within the commercial insurance
market. It is about control, and flexibility that sometimes is
not offered within the commercial insurance market. The
commercial market can be volatile at times, and captives can
help organizations manage waves in the underwriting cycle.
A commercial carrier can nonrenew, restrict limits or enact
rate increases even when there are no material changes to an
individual company’s exposures or loss experience.
What do companies look for when insuring exposures
through a captive insurance company?
Captives are useful for filling gaps in coverage. For example, a
large and complex organization’s various risk exposures may be
treated differently by the commercial market. Certain risks within
a complex organization may be more subject to rate increases or
nonrenewal than others, causing holes within the organization’s
risk management program. Captives have the flexibility to fill those
gaps. If a captive is already in place when a gap is created in the
commercial insurance program, the captive can respond quickly.
Where do emerging risks come in?
Sometimes the commercial market can take time to catch
up to new and different risks. When there are those new and
emerging risks that don’t fit neatly in an existing commercial
market bucket, there may be opportunity for captives. Captives
have demonstrated that they can be nimbler in many ways than
commercial carriers. Captives can quickly assess and understand a
complex and emerging risk, and take a comparable policy form and
“Captives have, over
time, successfully
established
themselves as a
viable solution for
managing cyberrisk.”
Visit the Issues & Answers section at
bestsreview.ambest.com
to
watch an interview with Aaron Hillebrandt.
adjust it, as needed, to the risk’s unique features. The commercial
market can get to that point, but often over time. The commercial
market for cyber liability has indeed gotten better, but it has taken
10-plus years.
Why are captive insurance companies seen as so
efficient?
Captives are generally very nimble because of their operational
structure. Traditional insurers, commercial carriers can be very
large organizations with complex IT, marketing and administrative
organizations. They often have expense ratios that can be 30% or
more of premium. Captives may be seen as lean by comparison.
Captives often outsource much of their administrative work to
third-party accounting, legal and actuarial firms. Captives often
operate with an expense ratio closer to 10% of premium, but there
is variation depending on the type of captive and the complexity of
the program. That efficient operating model gives captives a great
advantage in innovating and being nimble. And it contributes greatly
to captives’ reputation for efficiency and flexibility.
Share this edition at
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.
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GOLDEN OPPORTUNITY
New York Life, whose gold-
topped headquarters is pictured, is among mutual life
insurers benefiting from higher investment yields.
New York Life, Other Mutual Life Insurers
See Value in Boosting 2025 Dividends
20
New York Life declared a record-high dividend of $2.5 billion payable to
participating policy owners in 2025 and has paid out more than $1 billion in
annual dividends every year since 1990.
by Terrence Dopp
ew York Life Insurance Co. is among several
mutual life insurers that plan to offer record
dividends to policy owners, as it sees strong
levels of surplus.
In November, New York Life declared a record-
high dividend of $2.5 billion payable to participating
policy owners in 2025, which it said marked the
highest payout in almost 180 years as a company. The
company said it has paid out more than $1 billion
in annual dividends every year since 1990 and more
than $50 billion in cumulative payouts since then.
Along with whole life policies, the company is
also, for a ninth consecutive year, paying dividends on
participating mutual income annuities. In addition,
for a fifth straight year, New York Life is paying
dividends on NYL MY Life long-term care policies.
“A rising tide lifts all boats in that regard,” said
N
Terrence Dopp
is a senior associate editor. He can be reached at
terry.dopp@ambest.com
.
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Erik Anderson, senior vice president and chief
actuary with New York Life. “Companies have been
able to pick up a bit more investment yield and pass
that through dividends. That’s certainly been the
case for us. At the same time, it was another great
year for equity markets in 2024 and 2023.”
“If you take the interest rate environment and the
equity environment, and you’ve got overall favorable
macroeconomic factors, those contribute to being able
to pass more in dividends to policy owners,” he said.
Foundational Businesses
New York Life divides itself into two types of
businesses: foundational businesses, which Anderson
said delivers protection-first, holistic advice and
guidance to millions of customers through its
12,000 agents and advisers across the United States;
and strategic businesses, including investment
management, group benefit solutions, institutionally
owned life insurance and annuities, direct-to-
Life Mutuals
mailto:terry.dopp@ambest.com
“Our 2025 record dividend payout reflects
our unwavering commitment to delivering
consistently strong performance and
enduring value to our policy owners. As a
mutual company, our interests are directly
aligned with their needs, which means our
success is their success.”
Roger Crandall
Massachusetts Mutual Life Insurance Co.
consumer sales of life insurance and other solutions
to affinity group members, and Latin America’s
largest agent-sold life insurance business.
While the strategic businesses do not offer
participating products, they indirectly affect surplus
levels through a return on the investment, he said.
“To the extent that those businesses are kicking
off earnings, those earnings contribute to our
surplus, which supports the dividend paid to
our foundational businesses’ participating policy
owners,” Anderson said.
According to BestLink data, mutual life insurers
had a surplus of $165.75 billion in 2023, the most
recent year for which data was available.
New York Life is not alone in deciding to increase
the payments.
Massachusetts Mutual Life Insurance Co. also has
earmarked $2.5 billion for dividends, the most ever
and the 157th consecutive payout. Northwestern
Mutual said it had set aside a record $8.2 billion for
dividends in 2025, its 34th straight year of offering
the payouts to participating policy owners.
MassMutual said in a statement announcing the
payments that total adjusted capital grew to nearly
$34 billion.
“Our 2025 record dividend payout reflects our
unwavering commitment to delivering consistently
strong performance and enduring value to our
policy owners,” said Roger Crandall, chairman,
president and chief executive officer of MassMutual.
“As a mutual company, our interests are directly
aligned with their needs, which means our success is
their success.”
A MassMutual spokesperson said the company’s
payout balances preserving its long-term financial
strength and growth, while providing its customers
with value.
“Together with our strong operating fundamentals,
earnings contributions from our portfolio of strategic
businesses and investments—one of our most distinct
competitive advantages—have enabled us to provide
excellent value to our policy owners and customers
and is reflected in our 2025 dividend payout,” the
spokesperson said in an email.
Making the Move
In a statement announcing the dividends,
Northwestern said the move followed a decade
of “unprecedented market volatility,” ongoing
inflation and other economic pressures on financial
institutions. This year’s payout is expected to surpass
that of 2024 by more than $800 million, adding to
the company’s total of $160 billion.
Northwestern Mutual said it has $2.3 trillion
in life insurance policies in-force with 4.3 million
customers. Whole life policy owners will see $7.1
billion of the total, while disability customers and
annuities customers will see $560 million and $350
million, respectively.
“This historic dividend payout to policy owners
is possible because of our exceptional investment
performance, careful underwriting and prudent
financial management,” said John Schlifske in
the October statement. At the time, he was
Northwestern Mutual chairman and chief executive
officer; he retired at the end of 2024.
Higher dividends enhance the value of
participating whole life insurance, AM Best said in a
March 2024 Best’s Market Segment Report,
US Life/
Annuity Insurers Stay the Course as They Prepare for
2024 Uncertainty
.
“Mutual life insurers have led the way in sales
in recent years, as many publicly traded companies
stopped or substantially cut back their life insurance
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21
22
“It was a good investment year
across the board. You had the
second full calendar year of
higher interest rates, the S&P
returned over 20% for the second
consecutive year. There wasn’t
much that underperformed.”
Kevin Varvaro
AM Best
product offerings due to the low interest rate
environment, which made achieving profit margin
targets difficult,” the report said.
Kevin Varvaro, an AM Best senior financial
analyst, said the size of mutual dividends offered to
life customers is not as high a concern as crediting
rates for annuities.
“It was a good investment year across the board,”
he said. “You had the second full calendar year of
higher interest rates, the S&P returned over 20% for
the second consecutive year. There wasn’t much that
underperformed. The exception was real estate—
where there has been some reevaluation of what office
buildings are valued at. Aside from that, it was a
stellar year for equities, bonds and cash short term.”
Using the Money
In the mutual structure, each policyholder
essentially owns a piece of the company, meaning
the company’s sole purpose is to provide insurance
protection to them without a concern over
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shareholders. The insured population shares any
profit, buying them some independence from a
focus on quarterly earnings and share price that
some critics say can encourage short-term tactics at
the expense of long-term strategy.
The structure allows them to remain focused on
policyholders rather than stock owners. Additionally,
mutual companies sometimes tend to have higher
levels of capitalization than their publicly traded
counterparts, which allows them some freedom in
the way they invest that their publicly traded peers
do not always have.
Mutuals generally cannot access the equity capital
market like a stock company and tend to be very
cautious when managing the capital contributed by
their policyholder members.
“These boards have several considerations when
approving the dividend rate scales, which generally
become effective at the start of each year,” said
Stratos Laskarides, a senior financial analyst with
AM Best. “Firstly, they want to protect risk-adjusted
capitalization into the future, so they’ll declare a
dividend the company can support. They want
to maintain their balance sheet strength even in
severe stress test scenarios based on their relatively
limited access to capital sources. This also means the
dividend rate scales can be quite stable from year
to year, but may gradually increase over time with
higher interest rates.”
Laskarides said these boards generally prefer not
to approve a big increase that may need to be walked
back in future years to protect solvency ratios, given
that members and distributors favor stability. He
added that companies need to feel equitable to
current and future policyholders in terms of how
much excess capital they return to the policy owners.
New York Life’s Anderson said policy owners
most often tend to reinvest the dividends back into
their policies, taking them and purchasing a single-
premium life insurance policy to grow the death
benefit. Other options include using them to offset
premiums or taking them as a cash payment.
Anderson said the dividends make a case for the
strengths of the mutual structure.
“If you buy a policy from a mutual life insurance
company, there’s sort of one less mouth to feed,”
he said. “Mutuals operate on behalf of their policy
owners; there’s no Wall Street or shareholder
component.”
Life Mutuals
2023 US Life/Health
Impairments Update
Ten U.S. life/health companies became impaired in 2023, according to an AM
Best Special Report. Impairments rose following annual declines since 2019.
Editor’s Note:
The following is an edited version of
a Jan. 31 Best’s Special Report,
2023 US Life/Health
Impairments Update
. Visit
www.ambest.com
to access
the report.
Principal Takeaways
• Ten U.S. life/health companies became
impaired in 2023.
• Impairments rose following annual declines
since 2019.
This report identifies impairments that occurred
in 2023, as well as others that occurred from 2000
to 2022 first identified by AM Best this year. We
also provide greater detail on the lines of business
written by companies that became impaired
between 2000 and 2023. Specific causes have been
identified for some of the impairments, with most
falling into the category of general business failure,
typically arising out of some combination of poor
strategic direction, weak operations, internal control
weaknesses, or underpricing and under-reserving
of the business. The most relevant aspect of these
impairments may be the products the companies
offered and the products’ potential risks.
Defining Impairments
AM Best defines impairments as situations in
which a company has been placed, via court order,
into conservation, rehabilitation, or insolvent
liquidation. Supervisory actions undertaken by state
insurance department regulators without court order
are not considered impairments, unless there are
clear indications that policyholder payments may
be delayed or otherwise limited in some manner
through the regulatory oversight process.
A number of regulatory oversight actions may
be taken with respect to troubled insurers for
which court orders are not sought, such as required
company action plans, a variety of forms and levels
of supervision, or licensure actions. Companies
may be subject to insurance department orders
and actions on multiple occasions, particularly in
certain jurisdictions. Although regulatory actions
may suggest difficulties and impose constraints, they
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Life Impairments
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