Share on Facebook Share on Twitter Share on Google+ Share on Linkedin The low-interest rate environment has had a negative impact on Life and Annuity insurers causing them to redesign and re-price products with less generous features. In highlights from A.M. Best’s First Monday series, Vice President Steven Irwin and Assistant Vice President Rosemarie Mirabella review the challenges and opportunities within the U.S. Life/Annuity sector. According to Mr. Irwin “A.M. Best has a stable outlook on the Life/Annuity industry due, in part, to the improving economic environment…” , as well as the low-interest rate environment, a good risk adjusted capital positions, and continued refinement and improvement in the risk management and enterprise risk management processes. Ms. Mirabella added that the carriers are using rational underwriting and pricing, as well as improvement in the “risk management framework with respect to hedging and ongoing product de-risking.” The main challenge facing the sector is growth, according to Ms. Mirabella. While the retirement sector is underserved and under-penetrated, there are opportunities on the annuity side. Among other challenges and opportunities that face US Life insurers is on technological, including Big Data and predictive modeling. Mr. Irwin says the low-interest rate environment has been “a headwind” for a number of years, and that is expected to continue through 2015. There has also been regulatory uncertainty in a number of areas such as rules relating to captives, principle based reserving and capital standards. Mr. Irwin sees areas of potential growth in index annuities and indexed life products. He also sees growth opportunities in Asia and Africa. The $24 billion retirement market is also a tremendous opportunity, according to Ms. Mirabella. “Predictive data, data mining and predictive modeling are going to be huge in trying to penetrate the lower tier (mid-) markets and we will probably see a lot more innovation in around those disciplines.” We’d like to thank A.M. Best for their contribution to our program. If you’d like to see more of the First Monday Series, visit the A.M. Best website.