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Fears of how inflation will impact their portfolios once again topped the list of concerns among insurers, according to a major new survey that was taken even before the Trump administration tariffs were imposed.

More than half of the 405 respondents to Goldman Sachs Asset Management’s 14th annual global insurance survey cited inflation as a top concern, up from 42% in 2024.

According to the survey, the top five macroeconomic issues that pose the greatest risk to
insurers’ investment portfolios are:

• Inflation (52%)
• Economic slowdown/recession in the U.S (48%)
• Credit and equity market volatility (47%)
• Geopolitical tensions (43%)
• Tariffs/trade disputes (32%)

“We closed the survey six weeks ago,” said Michael Siegel, global head of the Insurance Asset Management and Liquidity Solutions for Goldman Sachs. “I think if we surveyed right now, you would see tariffs and trade disputes would be significantly higher.”

Nevertheless, the survey showed an overwhelming belief that inflation will decelerate in all markets: Americas, Europe, and Asia.

“The view that inflation will decelerate is off the table,” Siegel said. “So, it’s either inflation is going to remain stable, or inflation may accelerate. And this is a bit of a shift here. Last year it was more a view that inflation was coming down.”

Private asset demand is strong

Despite the implications rising inflation and slowing economic growth could have on markets,
demand for private assets remains strong, as 58% of insurers report planning to increase
allocations to private credit during the next 12 months.

Moreover, fears of recession have abated. Last year’s survey found 44% respondents expecting a recession in the current year, with fewer than 1% thought so this year.

“That has fallen off a cliff,” Siegel said. “Can we see a recession in years one through three or three through five, the answer is yes. But, a surprising number of respondents, around 20%, don’t think we’re going to see a recession at all in the U.S. markets”

Top asset classes

When asked which asset classes will provide the highest total return during the next 12 months,
insurers were bullish on private assets – private credit (61%) topped the list for the second
consecutive year.

The top five was rounded out by:

• U.S. equities (57%)
• Private equity (55%)
• Private equity secondaries (30%)
• High-yield debt (28%)

“The private credit market has experienced a significant transformation during the past decade,”
said Matt Armas, Global Head of Insurance for Goldman Sachs Asset Management. “We
expect it will continue to expand in 2025. Through this growth, insurance companies will have
ample opportunities to diversify their direct lending portfolios while pursuing attractive risk-
adjusted returns.”

Insurers’ S&P expectations tempered

Most insurers expect positive returns for the S&P 500 Index in 2025 (83%). However, after posting gains of 25% in 2024 and 26% in 2023, this year’s forecasts are tempered: 50% expect the S&P 500 to return between 5-10% and just 15% forecast returns between 10-20%.

A bullish private asset outlook has many insurance companies planning to raise allocations, according to the survey:

• 58% to private credit
• 40% to investment-grade private debt
• 36% to asset-based finance
• 32% to infrastructure debt
• 29% to private equity

Meanwhile, only 17% of insurers plan to increase allocations to U.S. equities, and even fewer
(10%) to European equities.

Operational synergies and economies of scale were identified by 68% as the primary drivers of
increased merger and acquisition (M&A) activity across the insurance industry.

The increasing adoption of Artificial Intelligence (AI) to improve efficiencies could prove to be a catalyst for further consolidation: 90% report currently using, or are considering utilizing, AI; this is up from 80% in 2024. Of those planning to adopt AI, 81% cited reducing operational costs as its primary benefit.

“These are very, operationally intensive businesses:  issuing bills, receiving premiums, investing premiums, receive claims, make claims payments,” Siegel said. “Therefore, the use of AI is seen as a way to reduce operating costs. Secondly, evaluating a risk. With tremendous amounts of data, AI is able to sift through that data and improve underwriting standards.”

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While more than 4 in 10 Americans surveyed named inflation as a major economic concern, the U.S. political environment topped inflation as their top financial worry.

These were the findings according to a new market intelligence report by Hearts& Wallets, Advice, Technology & Actions: Engagement with Human and Digital Influences and the Connection to Outcomes.

Top financial worries, in order, were:

• U.S. political environment: 47%
• Inflation: 44%
• Future of Social Security: 39%
• U.S. economy: 39%
• Future of healthcare in the U.S.: 35%
• U.S. deficit/future tax increases: 34%
• Conflict and strife around the world: 33%

Financial worry spurs more saving

As a result of these economic concerns, Americans are cutting spending and increasing savings. Nationally, 8 in 10 U.S. households have taken a saving/investing action in the past year, and saving more, an area overlooked by many current financial advisors, explained Laura Varas, CEO and founder of Hearts & Wallets. And two thirds of households plan to take a saving/investing action,she added.

“These top concerns indicate consumers may have several reasons to boost saving, especially if they perceive economic and government instability, worry about the future of Social Security, and how to pay for healthcare,” added Varas.

Top household saving and investing goals of consumers also point to consumers’ motivation to save and invest, according to Varas. Top goals are:

• Build up my emergency fund: 52%.
• Take a vacation: 44%.
• Have enough money to be able to work less/spend time as I want when older: 41%.
• Stop work/retire when I am older: 35%.
• Generate current income from my investments: 28%.

Goals that increased year over year (2023 to 2024) include having enough money to work less when older, stop work/retire when older, and take a vacation.

Support from financial advisors

Despite the actions of consumers to cut spending and increase savings, financial services firms aren’t delivering the desired support to help them, according to the survey.

So, what are some of the steps that financial services firms can take to provide this support and help their clients?

Hearts & Wallets Inside Advice Benchmarking reveals that advice on how to allocate savings is rare from financial advice experiences, said Varas. Most (67%) advice experiences do not even address allocation of new saving across account types.

Hearts & Wallets finds that advice experiences in more robust advice categories are linked to higher action-taking, Varas said. “The highest level goes beyond advice on investing and retirement to include advice on multiple goals (in addition to retirement), buy/sell investment recommendations, how to optimize taxes, detailed retirement planning, insurance and estate planning,” Varas said

“So more comprehensive advice really helps with positive outcomes,” she said, adding, “Of course, firms and advisors must be compensated for more robust advice. And the industry must work to ensure more households have some level of service and advice.”

In light of these financial worries, aAccording to Varas, firms and advisors can enhance support to help consumers act to cut spending or increase saving/investing by:

• Tailoring solutions to facilitate interaction with human advisors while harnessing the economies and efficiencies of digital.
• Offering a range of advice experiences to allow more households to achieve healthier financial outcomes by receiving at least some advice and service.
• Identifying competitive opportunities to align with consumer demand for help with budgeting and saving.

Financial advice linked to better outcomes

“Healthier actions and better outcomes are linked to advice in more robust advice categories but not more online activities. Younger households and more affluent households are more likely to take many actions,” Varas said.

Another takeaway is that U.S. households cut back on sources of information and advice year over year. Consumers are favoring themselves and advisors over other sources, including online and employers, said Varas. Reliance on online as a source of investment information and advice has remained stagnant for 3 years, hovering at about 60% of households. “This suggests digital advice may have reached saturation with current technology,” she added.

Today, the average household conducts four to five online activities related to investment information and advice, up from two activities in 2012, Varas said. 22% of households engage in 10+ online activities. Top activities are “track or check accounts” and “use planning tools.”

Among investment decision-making preferences, self-directed (DIY) investment decision-making is at its lowest level since Hearts & Wallets tracking began in 2010. “General contracting” is at a peak. Varas said that Hearts & Wallets coined the term “general contracting,” defined as “seeking input from various sources as well as making some decisions on my own.” Delegation to financial professionals, which has been in decline since 2018, ticked up year over year, she said.

Advice, Technology & Actions: Engagement with Human and Digital Influences and the Connection to Outcomes examines sources of financial information and advice, online financial activities, and financial actions taken and planned. The report is based on the Hearts & Wallets Investor Quantitative Database, with over 120 million data points on saving, investing and advice behaviors from 80,000 U.S. households the past 15 years. The latest wave was fielded from July 17-Aug. 9, 2024, with 5,989 U.S. households.

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From an advisor’s perspective, the lifetime relationship with a 55-year-old client can be highly valuable. But what is the average worth to an advisor in dollars and cents?

In its first in a series of consumer-focused profiles, SmartAsset has released an analysis of what the average 55-year-old prospect is worth to an advisor. SmartAsset also has unveiled a model that assesses the value to the client of working with a financial advisor.

The following table shows how the numbers break down from an advisor’s perspective of the value of a lifetime relationship with a 55-year-old client:

These percentages illustrate that while the advisor earns a healthy fee, the proportion that is relative to the extra savings delivered varies with the client’s retirement horizon, according to SmartAsset. A shorter time horizon (such as a consumer retiring at 67) might result in a higher fee percentage because the window for accumulating surplus is smaller, and risk management is more pronounced.

Lifetime value

With fee revenues ranging from roughly $150,000 to $200,000 over the relationship, the average 55 -year-old client is a substantial asset to an advisor’s practice, SmartAsset said. This lifetime value not only reflects the advisor’s compensation for managing risk and orchestrating a long term financial plan but also underscores the mutual benefits of a well structured, client–planner relationship.

In essence, while the client enjoys increased net worth and higher retirement income, the advisor benefits from a lucrative fee stream that can amount to nearly $200,000 over the course of the relationship. This dual benefit reinforces the value of comprehensive financial planning, not just for the client’s bottom line, but also as a cornerstone of an advisor’s business success.

Working with clients

So how does this research help an advisor enhance his client-marketing efforts and ultimately gain more clients? Advisors can use this research to help clients understand their full value proposition, said DeJohn. Many consumers may feel pressured by sales tactics and prefer to take the time to digest information on their own and from a third party without stakes in the potential relationship.

The research can help put an advisor’s expertise into context and dispel misconceptions about the associated costs, DeJohn said. Potential clients often don’t have a full understanding of the financial pitfalls they face, whether from internal factors like emotional and cognitive biases or external factors like changing legislation and financial products. “Therefore, the model can also help potential clients develop a clearer understanding of the potential for maximizing their finances through offensive and defensive strategies implemented with the help of an expert over time,” she said.

Reasons for developing the model

SmartAsset developed a model to assess the value of working with a financial advisor to help bridge the gap between the uncertainty that potential clients may feel about what a financial advisor can potentially do for them, as well as to help financial advisors understand, facilitate and market their value proposition by putting it in a new, measurable context based on data-backed assumptions, said Jaclyn DeJohn, CFP, and director of economic analysis at SmartAsset.

“Some common frustrations we see among consumers are that they think a financial advisor collects fees just to put their money into an index, which they can do themselves,” said DeJohn. “They often do not have an understanding of the full breadth of how an advisor’s guidance can potentially translate to their own benefit. On the advisor side, the model can be used as a helpful tool to demonstrate to potential clients the value they may be able to offer.”

Advisor vs. no advisor results

One of the biggest findings of the study was that even after accounting for all money flowing out – including inflation, retirement withdrawals and advisor fees – financial advisors can potentially help clients earn an additional average annual net yield of 2.39% to 2.78% to their clients’ bottom lines versus those who do not employ an advisor, said DeJohn.

And perhaps just as important, DeJohn said, the client is still likely to take away the lion’s share of the dollar surplus generated by their relationship with a financial advisor. “The model estimates that roughly one-third of the extra money generated by the relationship goes to the advisor, while roughly two-thirds go to the client,” she said.

Additionally, the model suggests that several factors can potentially help improve the client’s ROI on the client-advisor relationship, including a higher starting net worth and starting the client-advisor relationship at a younger age to allow more time for the benefits to compound.

Financial advisor impact on a client’s net worth

Financial advisors can help contribute to growing a client’s nest egg in many ways. SmartAsset’s estimates on the net benefit to this investment pot at age 77, not including any additional retirement income gained from the relationship, is as follows:Beyond the balance sheet, the annual retirement withdrawals (excluding Social Security or other potential sources of income) also highlight the value added by financial planning.

The improved annual withdrawal amounts demonstrate how professional planning can boost spending power in retirement, as well as the remaining nest egg, ensuring a better lifestyle even after fees are paid.

In summary, by age 77, the average 55-year-old stands to gain between $129,000 to nearly $291,000 in net worth, compared to a scenario without professional guidance, plus up to $763 more per month in retirement withdrawals, SmartAsset said.

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American National Insurance Co. will stop writing new life insurance policies in order to focus on other products, including the red-hot annuity market.

Scott Campbell, senior vice president of client experience and corporate communications officer, confirmed the decision Wednesday and sent this statement to InsuranceNewsNet:

“American National has made the strategic decision to stop writing new life insurance business and will continue to focus on growing our annuity, pension risk transfer and property & casualty lines. We have strong confidence in these businesses and expect them to be a big part of our long-term success.

“We remain committed to serving our current life insurance policyholders and will continue to fully service all in-force policies without interruption.”

Campbell said the application cutoff is May 31, 2025, and businesses must be placed by July 31, 2025.

‘Writing was on the wall’ for life insurance exit

Longtime life insurance insider Sheryl Moore is not surprised by the life insurance exit.

“I think the writing was on the wall when American National was acquired by Brookfield Reinsurance,” she said. “The triumvirate of an insurer/reinsurer/asset manager prefers to focus on indexed annuities.”

In May 2022, Brookfield Reinsurance completed the acquisition of American National Group, Inc., the parent company of American National Insurance Co., in an all-cash transaction valued at approximately $5.1 billion.

American National’s market share on the life side is small, Moore said, citing data from Wink’s Sales & Market Report, fourth quarter 2024. The insurer held a 1.68% share of the $3.4 billion non-variable universal life market. American National also held a 0.63% share of the $4.3 billion whole life market and a 0.9% share of the $2.4 billion term life market, said Moore, CEO of Wink and Moore Market Intelligence.

Based in Galveston, Texas, American National also held a 1.34% market share of the $427.7 billion market that is indexed annuities, she added.

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State insurance regulators resumed discussions Tuesday on a proposal to make a key measure of insurance companies’ financial health confidential.

The proposal by the Capital Adequacy Task Force would discourage insurers from releasing risk-based capital figures. RBC numbers are a regular feature of public companies’ financial reports and earnings calls with Wall Street analysts.

RBC requirements provide for a ratio to assess the level of risk associated with an insurance company’s assets. Insurers generally like to operate with a 400% to 450% RBC ratio. Brighthouse Financial is one insurer that has struggled with its RBC ratio in recent quarters.

The RBC change is an unusual proposal in that it united life insurers and consumer advocates in opposition. Regulators let the RBC proposal rest for months before reviving it Tuesday during a CATF session at the spring meeting of the National Association of Insurance Commissioners.

Ohio made the original proposal, which would prohibit publication of RBC figures in “press releases, earnings releases, webcast materials, or any other earnings presentations or webcasts.”

The concern is that wide dissemination of RBC figures is leading to a misunderstanding of insurance companies’ financial strength, Ohio regulators claimed.

“Because the NAIC formula develops threshold levels of capitalization rather than a target level, it is neither useful nor appropriate to use the RBC formula to compare the RBC ratio developed by one insurance company to the RBC ratio developed by another,” the proposal reads. “Comparisons of amounts that exceed the threshold standards do not provide a reliable assessment of their relative financial strength.”

After accepting comments early in 2024, including opposition letters from Transamerica and the American Council of Life Insurers, CATF paused the RBC proposal. Due to the delay, the task force adopted a new 45-day comment period at the urging of chairman Mike Yanacheak, chair actuary for the Iowa Insurance Division.

Key financial tool

The NAIC adopted the life RBC formula in 1993 “for specific regulatory needs,” CATF said in an information sheet. Four major categories were identified for the life formula: asset risk, insurance risk, interest rate risk, and all other business risk. The property/casualty and health formulas were implemented in 1994 and 1998, respectively

Brendan Bridgeland is director for the Center for Insurance Research and an NAIC-designated consumer liaison.

“The RBC is incredibly helpful in the five-year historical for tracking trends so a consumer group can look and see if there’s been radical changes that drive the need for a merger or something else,” he said Tuesday.

He was countered by Rachel Hemphill, chief actuary at the Texas Department of Insurance.

“By the time companies are well above any thresholds of concern, whether one is a little bit higher or a little bit lower than the other in RBC, should not be used as a way to compare or evaluate strength of those companies,” she said.

CATF also shared the 2024 comment letters. ACLI suggested a disclaimer “around the intended purpose of RBC data.”

Otherwise, the RBC proposal, “could lead to a significant lack of  transparency into an insurer’s financial health for consumers and policyholders. It could complicate validation of RBC-related information for rating agencies, investment analysts, and reinsurance and  other arrangements,” the ACLI letter states.

The American Academy of Actuaries also opposed the RBC change in a comment letter. Removing the RBC data only opens the door for alternative forms of solvency calculations, the AAA noted.

“We believe that RBC has served its purpose well in that it has assisted regulators in identifying weakly capitalized companies,” wrote Tricia Matson, chairperson of the Prudential Regulation Committee of the AAA. “It has also provided a general and consistent way for other stakeholders to obtain a high-level understanding of a company’s solvency position, which promotes public confidence.”

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Utah Insurance Commissioner Jonathan Pike is asking a judge to order rehabilitation for Sentinel Security Life Insurance Co. and a pair of reinsurers.

The March 21 petition to the Third Judicial District Court is the latest salvo in a dispute over the assets backing the insurance companies. In December, Utah regulators banned Sentinel Security from writing new life insurance after Dec. 31, 2024.

The insurance companies are owned by Advantage Capital Partners, which appealed the December order to a Utah administrative law court. A hearing is scheduled for May 12.

But Pike decided not to wait.

“This Petition results from a years-long history of self-dealing, conflicts of interest, and obfuscation by the ultimate controlling party of the Utah Insurers, Kenneth King,” the petition states.

King is the chairman and CEO of A-Cap. The Utah reinsurers are Haymarket Re and Jazz Re.

The petition asks the court to allow regulators to “take possession, control, and title to all assets of Sentinel, Haymarket, and Jazz Re, and to administer those assets pursuant to the laws of the State of Utah, as directed by the Court, staying all actions and proceedings relating to the Utah Insurers, in Utah and elsewhere.”

A spokesman for A-Cap sent InsuranceNewsNet this statement in reaction to the action taken against Sentinel Security:

“We are disappointed by the Department’s attempt to circumvent recent rulings in A-CAP’s favor by filing a new case in a different forum based on the same unsupported allegations. The Department’s case was foundering because it outsourced critical tasks to external firms and individuals ill-equipped to appraise complex private credit assets like ours.

“Now, in a transparent attempt to deflect blame and financial accountability, they are attempting to change to a new decision-maker. A-CAP prioritizes and protects its policyholders and firmly stands by our actions and belief that our companies remain strong. We look forward to rebutting the Department’s claims promptly.”

Similar situation in South Carolina

South Carolina regulators are in a similar place with Atlantic Coast Life Insurance Co., another A-Cap insurer domiciled there. South Carolina and Utah regulators shared information as they probed the financials of A-Cap insurers throughout 2024, court documents say.

In South Carolina, Michael Wise, director of the South Carolina Department of Insurance, issued an April 10, 2024 “confidential order” placing Atlantic Coast and Southern Atlantic Re into “confidential administrative supervision,” court documents say.

On Oct. 21, a directive informed the insurance companies that South Carolina was “unwilling to continue to permit the insurers to incur new liabilities …  when all companies[’] RBC are at a mandatory control level and each of the insurers exhibits negative surplus.”

South Carolina regulators directed Atlantic Coast to cease writing new business on Nov. 14, court documents say. Utah made its directive official on Dec. 2 and South Carolina followed on Dec. 11.

Things changed on Feb. 13 when South Carolina Administrative Law Judge Ralph King Anderson III sided with A-Cap. Anderson rebuked regulators and rejected the S.C. insurance department’s conclusion that Atlantic Coast is in financial distress.

“The evidence shows that ACL maintains a positive cash flow and has not experienced any difficulty paying amounts owed to either its policyholders or creditors,” he wrote.

Tied up with 777 Partners

The Utah Department of Insurance declined to comment on the decision to petition for rehabilitation just weeks before the administrative law court hearing. But its court filing claims that A-Cap used its life insurers to generate cash that it could invest in “high-return, high-risk investments” that would generate even more cash for the firm.

To accomplish this, A-Cap made agreements and loans with the troubled 777 Partners, the petition states.

“First, 777 Partners agreed the Utah Insurers would be able to reinsure their liability through 777 Re,” the petition says, “which allowed the insurers to continue writing insurance without the need to increase their capital reserves. Second, A-CAP agreed that the Utah Insurers would invest their capital in high-return investments in the form of short-term loans to entities controlled by 777 Partners and that 777 Partners would act as an asset management sub-advisor to the Utah Insurers.”

The Miami-based 777 Partners faces multiple lawsuits alleging financial improprieties. Notably, Leadenhall Capital accuses the investment firm of fraudulently borrowing hundreds of millions of dollars against non-existent or doubly pledged assets.

The U.S. Department of Justice issued criminal subpoenas to employees of 777 Partners as part of a money laundering investigation. Additionally, the firm has been accused of financial misconduct, including fraud and unpaid debts.

Beginning around 2020, A-Cap invested over $2.1 billion (approximately 26%) of the Utah insurers’ admitted assets in various 777 Partners investments, the petition claims.

“These investments have been non-performing and have been increased, rather than liquidated, to avoid recognizing losses. There has been virtually no return on the investments.”

‘Stopped providing documentation’

In Wednesday’s petition, Utah regulators say the A-Cap insurers “have stopped providing documentation to the Examiner and the Supervisor. As a result, the Examiner does not have access to the documentation needed to continue its fair valuation analyses.”

Utah regulators have said that a “full-scope financial examination” ordered by Pike yielded troubled results. The examination, outlined in Utah’s December order, probed the insurance companies for the years 2020 through 2023.

An independent contractor performed the examination and found several problems, the order says:

• More than 10% of the companies’ investments are in a single entity in violation of Utah code.
• The companies’ risk-based capital ratio, a key indicator of financial health, has declined.
• The companies’ investment portfolios included “a disproportionately large number of high-risk investments.”
• The companies hold investments in more than thirty loans or loan packages.

The examiner hired Harvest Investments to value assets held by the A-Cap insurers, the order states. Harvest reviewed three specific loans or loan packages to Flair Airlines, PAC Wagon/Phoenix Aviation, and JARM.

All were deemed by Harvest to be worth well less than the internal valuations assigned by the insurers.

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Annualized life insurance premium increased 3% in 2024 to $15.9 billion, according to LIMRA’s retail life insurance sales survey results, setting a record for the fourth consecutive year. In 2024, policy count was level with 2023 results.

LIMRA also reported record-high indexed universal life sales of $3.8 billion in new annualized premium and variable universal life new annualized premium rising 15% to $2.2 billion.

“Independent distribution continues to drive the record sales in the U.S. market. This channel represented 6 in 10 dollars sold in 2024 — up from half of new premium sold just five years ago and represented over 90% of the record indexed universal life (IUL) sales in 2024,” said John Carroll, senior vice president and head of Life & Annuities, LIMRA and LOMA. “As middle-income and mass affluent consumers look for new investment tools to help them save for retirement, the IUL market has shifted. We see more smaller and simplified policies sold to these consumers, who seek investment protection in a volatile equity market environment.”

In the fourth quarter, total new premium rose 9% year-over-year to $4.5 billion. The number of policies sold increased by 1%, compared with fourth-quarter 2023 results.

Indexed universal life

Indexed universal life (IUL) set a quarterly and annual sales record. IUL new premium rose 10% to $1.15 billion in the fourth quarter. New or enhanced product designs and expanded distribution propelled the sales this quarter with half of IUL carriers reporting gains. Policy count grew 6% in the fourth quarter.

In 2024, IUL new premium totaled a record-high $3.8 billion in 2024, up 4% from prior year. Policy count grew 10% year over year.

IUL new premium represented 24% of the total U.S. life insurance market in 2024.

Variable universal life

Variable universal life (VUL) new premium rose 37% to $741 million in the fourth quarter. The number of policies sold increased 10% in the quarter. For the year, VUL new premium was $2.2 billion, up 15% year over year and policy count improved 6%.

In 2024, VUL held 14% of the total U.S. individual life insurance market.

Fixed Universal Life

Fixed universal life (fixed UL) new premium dropped 1% in the fourth quarter to $275 million. Policy count fell 13% from fourth-quarter 2023 results. For the year, fixed UL new premium was $1.1 billion, 7% higher than prior year’s results. Policy count fell 12%.

Fixed UL new premium held 7% of the U.S. life insurance market in 2024.

Whole Life

Following three consecutive quarters of declines, whole life (WL) sales rebounded in the fourth quarter. WL new annualized premium totaled $1.6 billion in the fourth quarter, 3% above prior year’s results. The number of WL policies sold increased 3% in the quarter.

“Final expense and other smaller-face whole life policies drove the overall growth in the fourth quarter,” said Karen Terry, assistant vice president and head of LIMRA Insurance Product Research. “Historically, interest rate cuts and increased market volatility bolster whole life sales and we expect this trend to continue in 2025.”

In 2024, WL new premium fell 4% to $5.8 billion, compared with 2023 results. Policy count fell 2% year over year.

WL new premium represented 36% of the total life insurance market in 2024, which is the product line’s lowest market share since 2014.

Term Life Insurance

Term life new premium totaled $749 million, down 1% than prior year’s results. Policy count also fell 1% in the quarter. In 2024, new premium topped $3 billion, up 1% compared with 2023 results. The number of policies sold increased slightly, up 1%.
Term life new premium represented 19% of total sales in 2024.

Growth by life insurance product

For more details on the sales results, go to Life Insurance Sales Growth Rates (2024 Fourth Quarter) in LIMRA’s Fact Tank.

LIMRA’s Retail Individual Life Insurance Sales Survey represents 80% of the U.S. life insurance market. With more than 100 years of expertise, LIMRA conducts over 80 benchmark studies — producing nearly 500 reports annually — for our members and the industry as a whole. These studies provide trusted insights and a comprehensive understanding of market dynamics, trends, and behaviors.

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State insurance regulators are not known for making bold moves or acting quickly. That history made it more newsworthy when the Life Actuarial Task Force released a proposal in February 2024 to enhance the testing of reserves supporting offshore reinsurance deals.

“The ability of insurers to significantly lower the total asset requirement for long-duration blocks of business that rely heavily on asset returns appears to be one of the drivers of the significant increase in reinsurance transactions,” reads the proposal from David Wolf, acting assistant commissioner for the New Jersey Department of Banking and Insurance, and Kevin Clark, chief accounting and reinsurance specialist with the Iowa Insurance Division.

The effort is seen as regulators seek to get a handle on a life insurance industry that has become more financially complex. Once investment firms took an ownership interest in life insurers, offshore reinsurance deals boomed.

U.S. life insurers have nearly doubled their ceded reserves since 2019, increasing from $710 billion to $1.3 trillion in 2023, Fitch Ratings noted in a recent report. During the same period, reserves ceded to offshore jurisdictions nearly quadrupled, exceeding $450 billion.

80% of offshore reinsurance is in Bermuda

Bermuda represents approximately 80% of offshore reinsurance by reserves.

Reinsurance is no longer a straightforward transaction. A private equity company might be reinsuring a block of business with its own reinsurer and claiming assets from an affiliated entity.

The modified coinsurance reinsurance trend allows a ceding insurer to retain both assets and statutory reserves but transfer the risk of the reinsured policies to the reinsurer.

The implications of a financial catastrophe are obvious to regulators.

“Regulators are concerned that the level of policyholder protection may be declining,” the Wolf/Clark proposal said.

Not conservative enough

Larry J. Rybka is chairman and CEO of Valmark Financial Group. His 38 years in the business nearly parallel the rise, mispricing, and collapse of long-term care insurance, as well as annuities with living benefits and life insurance with long-term guarantees.

At the time, company actuaries argued that reserving for these different product innovations was “redundant,” Rybka noted. “Now, 20-25 years later, in retrospect these reserving assumptions were not conservative enough.”

Rybka objects to the ongoing LATF efforts to create an asset adequacy testing “guideline” for offshore reinsurance agreements, calling it “window dressing.” Regulators hope to have the guideline in place by the end of 2025.

But Rybka and other critics say it does not even give the appointed actuary the right to require additional reserves. If the actuary finds reserves lacking, they should “reflect that in their actuarial opinion,” the guideline states.

“Essentially, if the actuary hired by the carrier thinks its boss needs to set more money aside to cover the promises made to policyholders, the actuary needs to put it in a report,” Rybka said in a comment letter to the LATF. “It’s not hard to envision said report being filed away with little attention given to its ‘recommendations.’ ”

Meanwhile, Brian Bayerle, chief life actuary for the American Council of Life Insurers, urged regulators to give appointed actuaries “a degree of flexibility … in their assessment of the adequacy of reserves.” The actuary must align their work with the regulatory framework of the offshore jurisdiction, he noted in a comment letter.

Meanwhile, in Bermuda

The Bermuda Monetary Authority is feeling the pressure to better regulate its burgeoning reinsurance sector as well. Ironically, the BMA begins its 2025 Business Plan by comparing itself to Rudy Ruettiger, the subject of the 1993 movie “Rudy.” An undersized afterthought, Ruettiger bucked the odds to make the Notre Dame football team in 1974-75.

While the BMA might feel it is battling overwhelming odds, it is not backing away. Its business plan includes a proposal for “enhanced public disclosure requirements on investments for long-term commercial insurers.” The authority is also considering strengthening its treatment of structured products and loans.

“In our regulatory initiatives, customer protection will remain at the forefront in 2025,” said Craig Swan, CEO of the BMA. Swan could not be reached for comment.

Suzanne Williams-Charles, CEO of the Bermuda International Long Term Insurers and Reinsurers association, spent 10 years as a deputy director at the BMA. The island is very concerned about global perceptions that it permits freewheeling financial impropriety, she said.

A BMA consultation paper is specifically directed at increasing the level of transparency as it relates to the investment portfolios and the liabilities, and “essentially what the companies are actually doing,” Williams-Charles explained.

“The frameworks in Bermuda for transparency are very well established, but I think that there will always be this underlying offshore perception,” she added. “So, I think that Bermuda has had to work very hard to consistently remind key stakeholders and policyholders of the frameworks that are in place and how robust they are.”

The Caymans are in play

Not all reinsurance is parked in Bermuda. Fitch Ratings estimates that a small percentage of offshore reinsurance is in other jurisdictions, notably, the Cayman Islands.

The number of reinsurance companies in Cayman has grown year on year, from 58 writing $9.3 billion in 2020, to 94 writing $25.2 billion in 2024 by the end of Q3, Captive Review recently reported.

The Cayman Islands Monetary Authority found itself in the news last month after Marc Rowan, CEO of Apollo Global Management, blasted regulators for being “asleep at the regulatory switch” while “$150 billion of reserves have moved offshore to Cayman Islands with a fraction of the capital of the U.S. or the Bermuda system, putting the system at risk.”

Athene Life & Annuity, a wholly owned subsidiary of Apollo, remains the No. 1 seller of annuities. Athene Life Re touts itself as “one of Bermuda’s [l]argest annuity reinsurance companies as measured by capital base.”

In his comments made during a quarterly earnings call, Rowan challenged U.S. regulators to get a handle on the Cayman Islands.

“The state-based regulatory system, which we believe in and are being supportive of, they have a choice of evolving to address this issue in payments, or risk someone stepping in and usurping their authority,” Rowan said.

Perhaps not coincidentally, Greg Mitchell, chairman of the board of directors at the Cayman International Reinsurance Companies Association, joined a March LATF call to reassure NAIC regulators.

“Under the Credit for Reinsurance model [regulation], we have to fully collateralize at no less than the U.S. [statutory] reserve,” he explained. “So, regardless of what the reinsurer holds as an assumed reserve, we’re still collateralizing with the full U.S. stat.”

A trend that will continue

Fitch Ratings expects the offshore reinsurance trend to continue to thrive. Booming annuity sales are a main driving force. Annuity sales increased from $255 billion in 2021 to $313 billion in 2022, $385 billion in 2023, and $432 billion in 2024, according to LIMRA’s Fact Tank.

Within this business environment, however, the rating service has concerns about “unsustainable growth,” or insurers growing much faster than the industry.

“That can be an indicator of insurers potentially sacrificing profitability for topline growth,” said Jamie Tucker, senior director and life insurance sector head for Fitch Ratings’ North American Insurance Ratings Group. “If someone’s motivated to grow, they could offer the highest credited rate, and perhaps easily grow that top line. But over time, that’ll be reflected in the financials.”

Meanwhile, the National Alliance of Life Companies is concerned that its members, more than 50 small- to mid-sized life insurers, could be squeezed out by the push for heavier regulations on offshore reinsurance.

“Smaller and mid-sized insurers operate with leaner resources compared to larger market players,” wrote Scott Harrison, CEO of NALC, in a letter to the LATF. “The guideline introduces significant additional overhead costs needed to perform asset adequacy testing for ceded business.”

The additional cost of regulation would impact other parts of the business and increase the costs passed on to the consumer, Harrison added.

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American insurers are being urged not to drag their feet on ensuring their use of AI is “explainable,” as regulators and consumers alike begin to demand it.

“It’s not like this is a future issue. The data that we see, and then also the qualitative aspect of that, indicate that the investments going on now, which are largely in things that are being tested and tried out, are going to move into production, and we need to be ready for that,” insurance technology expert Mike Fitzgerald, insurance industry advisor, SAS, said.

Fitzgerald said explainable AI, which relates to an artificial intelligence tool, model or solution’s decisions or output being readily understood by humans, is key to preparing for this.

“The need exists now, but it’s coming because we’re really at the front end of that investment curve and the production is coming. So, the regulator is going to be looking for things; the consumers are going to be expecting to not see bad results from the use of these tools; and insurers overall are going to want to have more control than they’ve ever had around their analytic models — including AI, including predictive models, including advanced analytics,” he said.

What is explainable AI?

Explainable AI (XAI) is about the clarity of the reasoning of how an AI tool makes a decision. It can refer both to an actual AI system, or a larger concept of AI technology designed in a way for its logic to be easily understood by humans.

For example, in an insurance context, if an AI tool was used in claims handling and resulted in a denial, XAI would have a clear and transparent reasoning behind that denial.

“Explainable AI is why an analytic model reached a result that it did. In other words, if it’s using weights, certain data or certain pre-scripted rules or values that it’s been directed to, then all of those things go into why it came up with a result,” Fitzgerald explained.

Why XAI must not be overlooked

According to Peter McMurtrie, partner and insurance practice lead, West Monroe, many insurers have somewhat overlooked the explainability of AI in the race to roll out the new technology.

“A lot of AI is generating outcomes, but there’s a bit of a black box methodology in terms of how the outcomes are being created. That can be through a combination of complex algorithms [or] the myriad or the variety of data sources that it’s being trained on. Companies that are using those solutions [can be] really focused on the reliability of the outcome but not the transparency around showing your work or showing the math,” McMurtrie said.

However, Fitzgerald noted that the need for XAI increases as AI becomes more prominent in insurance and use cases expand.

“In the ‘early days’ of AI, this wasn’t really necessary because there weren’t that many uses. But it’s kind of been democratized to where the usage is ubiquitous, and that has opened up a number of different issues and concerns,” he said.

To this end, Fitzgerald suggested explainable AI can be thought of as an “exercise in change management.

“A lot of things are still in the laboratory, but as they move into production, as they move into general use, as insurers look to get value out of their investments and they move into the everyday workflow of an insurer, then you have to have different tools in order to make sure that it’s being used and that you understand what it’s doing appropriately,” he said.

Demand for explainable AI

McMurtrie noted that the two largest demands for explainable AI come from insurance regulators and everyday consumers, both of whom want transparency and to understand how AI is being used in an ethical, unbiased way.

“Not always, but in some instances, customers are more comfortable when they can understand or have that transparency of how AI is coming up with the recommendations. And then the regulators clearly want visibility into what is the AI being trained on, what are the models being used [and] how are the outcomes being derived,” McMurtrie said.

“Insurers not only want to comply with the law, but they want to make sure that they’re doing the right thing by their customers. So, it’s not only just the regulation but it’s also because it protects the customers, it protects the brand of the insurer to understand and be able to explain and know why — that’s the AI explainability — their analytic models reach the conclusions that they do,” Fitzgerald added.

Additionally, Fitzgerald said explainability builds trust among end-users in the company who will have to use the model, helping them feel more comfortable adopting it and using it with clients.

“That adoption piece is tied directly to trust, and trust is tied to being able to explain to that technical underwriter, claims adjuster, loss control expert, you name it, why a model did what it did, and that’s why it’s so important,” he said.

SAS is a software development company founded in 1976 and based in Cary, NC. With over 400 offices around the world, SAS provides business analytics and AI solutions to clients.

West Monroe Partners is a business and technology consultancy based in Chicago, Illinois. Founded in 2002, the firm has more than 2,000 employees in 10 offices around the world.

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According to a recent study by Jackson National Life Insurance Company, there is a notable gap between individuals’ perceptions of health care and long-term care retirement costs and their overall financial preparedness, underscoring the need for better retirement planning.

“Retirement should be a time for security and stability; however, our research shows many households may be unprepared for the realities of the healthcare challenges and expenses they will face,” said Glen Franklin, assistant vice president of Research, RIA and Lead Generation Strategy for Jackson National Life Distributors LLC, the marketing and business distribution of Jackson.

“These new survey data should be a wakeup call for policymakers, financial professionals and older Americans themselves,” said Andrew Eschtruth, director of the Center for Retirement Research at Boston College. “We are particularly concerned that too many people nearing or in retirement don’t have a good grasp of their potential healthcare needs and out-of-pocket costs, which could narrow their options when it comes time to pay the bills.”

Retirement cost findings

Key findings from the research include:

• •Healthcare costs are grossly underestimated. Nearly two-thirds of pre-retired investors surveyed are underestimating their prospective healthcare expenses in retirement, anticipating health care expenses at least $1,220 below the $8,600 annual estimate and possibly increasing their healthcare risk. Additionally, only 27% of investors surveyed believe they will require long-term care at some point in their lives. However, 70% of individuals turning 65 each year are likely to need this type of care at some point in their lives. This is particularly notable, as Jackson’s recent longevity risk study found the vast majority of investors inaccurately predict their life expectancy, increasing retirement income planning risk.
• Rising costs and advancements in technology increase financial burden. Advances in medical technology and treatments are expected to increase healthcare costs significantly over the next decade. The price of medical care including services, insurance, drugs and equipment, has increased by over 120% since 2000, leaving many retirees at risk of draining their savings. These findings align with insights from Jackson’s 2024 inflation risk study, which examined how pre-retired households struggle to adapt to rising costs of essential expenses, including healthcare, in the face of inflation.
• Investors are considering asset spend-down to qualify for Medicaid. More than 60% of investors surveyed said they plan to or may consider spending down their assets to qualify for Medicaid as a long-term care funding solution but may be underprepared for the dramatic life changes that would come with spending down their assets.
• Concerns over long-term care costs are amplified among financial professionals surveyed. Two in five financial professionals are concerned that clients will be unable to afford acceptable care, with 56% citing this as a major risk for retirees.
• Personal experience drives better preparedness. Respondents who have seen family members require long-term care are nearly twice as likely to believe they will need similar care. This group is also more proactive in exploring costs, adjusting retirement timelines and planning for assisted living expenses.

“Our research is particularly timely given potential policy shifts resulting from the election outcome, as proposals addressing healthcare reform and federal funding for long-term care programs could significantly impact retirees’ healthcare costs and savings strategies. This further underscores the importance of working with financial professionals to prepare for an evolving landscape and proactively address healthcare risks in investors’ retirement plans.”

Estimating retirement costs

When respondents were asked for their best estimate of how much money they and—if applicable—their spouse/partner will spend per year after they retire for out-of-pocket healthcare costs, including doctors, hospitals, prescription drugs, vision care, and dentistry, 35% of them estimated less than the median amount of $4,000/year, while 23% could not make an estimation, said Franklin. Meanwhile, he added, 80% of respondents think that someone in poor health would spend more than $5,000 per year on out-of-pocket healthcare costs alone, while respondents in poor health actually report an average of $4,700 per year for total healthcare expenses.

And when respondents were asked for their best estimate of how much money they and—if applicable—their spouse/partner will spend per year after they retire on all health insurance costs, 57% estimated less than the likely range of $10,000-15,000 per year, while 34% could not make an estimation. Then when they were asked how much they think it would cost annually to get around-the-clock, long-term care in their home, 38% estimated less than the likely range of $75,000 or more. For the annual cost of the average nursing home in their area, 58% estimated less than the likely range of $100,000 or more.

Underestimating costs can negatively affect a consumer’s financial and retirement planning. As Franklin pointed out, “underestimating what is likely to be the largest expense in retirement can result in failure to identify sufficient sources of guaranteed income to cover necessities, or depletion of financial assets with many years left to live—both of which could cause a dramatic decline in lifestyle or—in the worst case—financial insolvency and the inability to maintain independence.”

Teaching clients about healthcare costs

So, what are some of the steps that advisors can take to teach their clients about these costs and help them take a proactive approach to their financial planning? Sharing the basic facts is a great start, said Franklin. In surveying financial professionals, he said that 53% reported that they do not discuss Medicare, Medicare Advantage or supplemental health insurance with any of their clients. Moreover, 59% reported that they do not discuss the financial risk of needing long-term care with any of their clients. “Their clients cannot properly prepare for retirement if they do not have a full picture of the major costs involved with retirement,” he pointed out.

The research, conducted between July 12 and August 2, 2024, included online surveys of more than 400 financial professionals and 500 investors with at least $100,000 in financial assets and between the ages of 48 and 78. Respondents were required to participate in or lead household financial decision-making.

The study is the third installment of Jackson’s Security in Retirement Series, conducted in partnership with the Center for Retirement Research at Boston College, and follows the initial longevity risk and inflation risk studies, which were released over the past 15 months. Jackson said that this multi-phased research initiative aims to provide useful, actionable and research-based insights on many potential threats to financial security in retirement.

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