“The US life insurance industry is still feeling the impact of a slow growth decade,” said the Ernst & Young report. During the period from 2008 to 2018, the number of active life insurance policies has decreased by almost a quarter.
In March 2020, the AM Best rating agency revised its industry outlook from “stable” to “negative”, citing low business profitability.
Payouts on policies are the main concern of insurers; they keep huge assets in reserve for this reason. It is approximately $7.6 trillion in the United States.
Most life insurance companies invest assets in fixed income securities, usually corporate or government bonds.
The largest American life insurance company MetLife invested almost 60% of its portfolio this way. And while the stock market is recovering, many of the issuing companies are on the ropes.
Global analyst firm CoreLogic has already sounded the alarm. "Mortgage delinquencies have exceeded the level of the Great Recession," the company said in a report.
Despite the drop in income, the probability of bankruptcy of life insurance companies is low, since the business itself has a large margin of safety.