New reinsurer “Martello Re” launches with backing of MassMutual, Centerbridge Partners and Brown Brothers Harriman

Link:https://www.massmutual.com/about-us/news-and-press-releases/press-releases/2022/01/new-reinsurer-martello-re-launches-with-backing-of-massmutual-centerbridge-partners-and-brown-brothers-harriman

Excerpt:

Martello Re Limited (“Martello Re”), a licensed Class E Bermuda-based life and annuity reinsurance company with initial equity of $1.65 billion, has been launched with the financial support of Massachusetts Mutual Life Insurance Company (“MassMutual”), Centerbridge Partners, Brown Brothers Harriman, and a pre-eminent group of institutional investors and family offices, including Hudson Structured Capital Management Ltd. (doing its re/insurance business as HSCM Bermuda). Barings and Centerbridge will act as asset managers for Martello Re.

Through a commitment to long-term financial strength, creative solutions, and unique investment capabilities, Martello Re plans to offer a differentiated value proposition to its counterparties. The company will initially focus on providing MassMutual and its subsidiaries with reinsurance capacity on current product offerings, after which it will offer its services selectively to other top insurers in the life and annuity space.

MassMutual and its subsidiaries will initially reinsure approximately $14 billion of general account liabilities to Martello Re and also enter into a flow arrangement to reinsure new business. Both transactions are expected to close in February 2022 and have received regulatory approval.

Publication Date: 12 Jan 2022

Publication Site: MassMutual

Pacific Life Fined for Unlicensed Pension Risk Transfers in New York

Link: https://www.ai-cio.com/news/pacific-life-fined-for-unlicensed-pension-risk-transfers-in-new-york/

Excerpt:

Pacific Life Insurance Co. has agreed to pay a $3 million fine after a New York Department of Financial Services (DFS) investigation found that the firm had conducted pension risk transfer (PRT) business in the state without a license.

It is the third enforcement action by the DFS against a major insurance company for unlicensed PRT business. In April 2020, the regulator fined Athene $45 million, and in February it fined AIG $12 million, both for conducting unauthorized pension risk transfer transactions in New York.

Author(s): Michael Katz

Publication Date: 14 Jan 2022

Publication Site: ai-CIO

Is life insurance a human capital derivatives business?

Link: https://math.illinoisstate.edu/Krzysio/KO-JII-Invited.pdf

Graphic:

Abstract:

Life and disability insurance, as well as annuities, traditionally have been analyzed as products providing protection against random losses. This article proposed that these products can be viewed as derivative instruments created to address the uncertainties and inadequacies of an individual’s human capital, if human capital is viewed as a financial instrument. In short, life insurance (including disability insurance and annuities) is the business of human capital securitization.

Author(s): Krzysztof M. Ostaszewski, PhD, MAAA, FSA, CFA

Publication Date: 2003 — vol 26, pp. 1-14

Publication Site: Journal of Insurance Issues

Do You Get Your Money’s Worth From Buying An Annuity?

Link: https://www.forbes.com/sites/ebauer/2021/07/08/do-you-get-your-moneys-worth-from-buying-an-annuity/?sh=380f33612082&fbclid=IwAR1dlxEjlWlmPSetMplHWU6BdPjzzo7ju983c73QKr5KKKn29PjurCq_YmA

Excerpt:

But measuring the value of annuities, generally speaking, does tell us whether consumers are getting a fair deal from their purchases, and here, a recent working paper by two economists, James Poterba and Adam Solomon, “Discount Rates, Mortality Projections, and Money’s Worth Calculations for US Individual Annuities,” lends some insight.

Here’s some good news: using the costs of actual annuities available for consumers to purchase in June 2020, and comparing them to bond rates which were similar to the investment portfolios those insurance companies hold, the authors calculated “money’s worth ratios” that show that, for annuities purchased immediately at retirement, the value of the annuities was between 92% – 94% (give-or-take, depending on type) of its cost. That means that the value of the insurance protection is a comparatively modest 6 – 8% of the total investment.

But there’s a catch — or, rather, two of them.

In the first place, the authors calculate their ratios based on a standard mortality table for annuity purchasers — which makes sense if the goal is to judge the “fairness” of an annuity for the healthy retirees most likely to purchase one. But this doesn’t tell us whether an annuity is a smart purchase for someone who thinks of themselves as being in comparatively poorer health, or with a spottier family health history, and folks in these categories would benefit considerably from analysis that’s targeted at them, that evaluates, realistically, whether annuities are the right call and whether their prediction of their life expectancy is likely to be right or wrong.

Author(s): Elizabeth Bauer

Publication Date: 9 July 2021

Publication Site: Forbes

Ruark Consulting Releases 2021 Variable Annuity Studies

Graphic:

Excerpt:

Pandemic-related factors dampened VA policyholder behavior in 2020. Extreme market activity in the first half of the year, disruption to policyholders’ usual communication patterns with advisors and agents by COVID-related social distancing, and the suspension of required minimum distributions under the CARES Act all served to depress surrender and income commencement behavior; however, the effects were not uniform, instead manifesting in specific market sectors as described below.

In the first half of 2020, declines in account values made guarantees relatively more valuable, leading to greater persistency.

As annuity sales volumes fell in 2020, VA surrender rates fell as well. However, the declines in surrender rates were concentrated among ultimate contract durations, where rates fell 1-2 percentage points independent of rider type or benefit value. Evidence suggests producers focused their attention on contracts at the shock duration (immediately following the expiration of surrender charges), leading to less turnover among the longest-dated contracts. The decline in surrenders is suggestive of a new, unique surrender regime, distinct from the regimes we observe before and after the 2008 financial crisis.

Author(s): Eric Halpern

Publication Date: 25 June 2021

Publication Site: Ruark Consulting

NAIC Forms Work Group To Better Regulate Index-Linked Annuities

Excerpt:

A National Association of Insurance Commissioners’ task force today created a subgroup to focus solely on the index-linked annuity products.

“These products are exclusively filed in the states as variable annuities and are funded through non-unitized separate accounts,” read a notice to the task force from Pete Weber, chief life actuary at the Ohio Department of Insurance. “The task force has discussed developing a draft standard for minimum interim values for these products and providing direction for implementing the standard.”

Regulators gave the Index-Linked Variable Annuity Subgroup a 2021 charge to: Provide recommendations and changes, as appropriate, to nonforfeiture, or interim value requirements related to Index-Linked Variable Annuities.

Author(s): John Hilton

Publication Date: June 2021

Publication Site: insurancesnewsnet