We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (21,155)
  • Industry Conferences (2)
  • Industry Job Openings (35)
  • Moore on the Market (414)
  • Negative Media (144)
  • Positive Media (73)
  • Sheryl's Articles (800)
  • Wink's Articles (353)
  • Wink's Inside Story (274)
  • Wink's Press Releases (123)
  • Blog Archives

  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • September 2008
  • May 2008
  • February 2008
  • August 2006
  • Why Variable Annuities Scare a Fed Economist

    March 13, 2018 by Allison Bell

    Lawmakers in Washington are working on bills that could reduce the role of federal financial systemic risk managers in overseeing life insurers.

    But at least some economists still believe that, whatever happens in Congress, some life insurers still engage in activities that, in theory, could rattle the U.S. financial system.

    Yaron Leitner, a senior economist at the Federal Reserve Bank of Philadelphia, talks about his concerns in a paper in a recent issue of the bank’s quarterly economics journal. Leitner has written papers in the past about topics such as government bailouts of private financial institutions, stress testing, and ideas about why financial markets freeze.

    Click HERE to read the full story via ThinkAdvisor.

    In the new paper, Leitner gives economists and bankers a general overview of life insurance company activities that could, possibly contribute to financial instability. He agrees with life insurers’ premise that traditional insurer efforts to protect people against death and longevity create little risk for the rest of the financial system.

    Leitner argues, however, that some life insurers have branched out and do things that could add to national financial problems when overall conditions are already bad. He says one of the activities that could make bad conditions worse is offering variable annuity living benefits guarantees.

    A full copy of the paper is available here.

    Some in the life insurance industry have argued that bank-centric economists tend to be easier on banks because they’re usually closer to banks. Leitner, for example, works for the Federal Reserve Bank of Philadelphia, not the Federal Life Insurance Company of Philadelphia. But his views could influence colleagues who, in many cases, may also have more experience with banks than with life insurers.

    Here’s a look at five things Leitner says about his concerns about variable annuity living benefits guarantees.

    1. Offering variable annuity living benefits guarantees is not a traditional insurance company activity.

    Life insurance agents may think trying to help retirement planning clients earn a decent return, while protecting the clients’ assets against a stock market crash, is a commonsense extension of letting variable annuity users control the investments used inside the annuities.

    Leitner says the problem is that life insurers use their own assets, or “general account assets,” to back the minimum living benefits guarantees.

    “These guarantees may kick in during an economic downturn, as when equity prices drop, adding stress to an already-stressed economy,” Leitner writes.

    2. The VA guarantee obligation total has been growing.

    Many insurers that were in the variable annuity market have talked about getting out of that market, adjusting the guarantee options available with new products, and, in some cases, finding ways to pay annuity holders to give up benefits guarantees.

    In spite of those moves, the dollar value of variable annuities with living benefits guarantees increased to $843 billion in 2014, from $292 billion in 2008, Leitner writes.

    “Rapid growth of an activity is a particular source of regulatory concern because it suggests that risks may not have been fully priced in,” Leitner writes.

    3. To economists, the biggest insurers look as risky as the biggest banks.

    Analysts at the New York University Stern School of Business V-Lab have come up with an indicator, “SRISK,” that shows how big of a capital hole a firm might face if a broad market index falls by 40% over the next six months.

    The SRISK charts show that, in August, the four biggest publicly traded banks have could have faced a combined capital hole with a total value of about $100 billion in the SRISK scenario, and that the four biggest publicly traded life insurers could also have faced a combined capital hole of about $100 billion in that scenario, according to a Leitner figure based on the SRISK data.

    4. To economists, banks look as if they’ve been de-risking more than life insurers have.

    “Since 2008, SRISK has declined significantly for large banks but has increased for large insurance companies except AIG,” Leitner writes.

    He presents charts showing that two large banks’ SRISK exposure shot up around the time of the Great Recession but has since dropped; the charts show that four big life insurers’ SRISK exposure levels rose somewhat during the Great Recession and have stayed at Great Recession levels.

    5. State insurance regulators may have different goals than federal banking regulators.

    Life insurers, and state insurance regulators, have argued that state insurance regulators are closer to life insurers than federal banking and securities regulators, know more about insurance, and are better equipped to handle problems at banks.

    Leitner contends that state insurance regulators’ goals may be different from federal regulators’ goals.

    “Those who argue that federal regulation is necessary note that an individual insurance company does not take into account the negative consequences of its failure on the rest of the economy,” Leitner writes. “Likewise, an individual state does not take into account the consequences of its actions for other states. Individually or collectively, the states are not responsible for the stability of the U.S. financial system.”

    One solution could be to let state regulators oversee traditional insurance activities, while letting federal regulators oversee nontraditional activities, but that’s difficult, in practice, because the nontraditional activities are often deeply intertwined with the traditional insurance activities, Leitner writes.

    Originally Posted at ThinkAdvisor on March 13, 2018 by Allison Bell.

    Categories: Industry Articles
    currency