Life Insurance Industry Investments: Rethinking Liquidity Needs and Required Capital in 2009


Mike Warner  
Conning, Inc.

Conning Research: Life Insurers Tackled Capital Challenges in 2009  

--New challenges ahead in falling interest rates and regulatory changes   

(Hartford, CT) September 14, 2010—Analysis indicates that the U.S. life insurance industry took significant steps to tackle its capital challenges in 2009 and early 2010, according to a new study by Conning Research & Consulting.

“The life insurance industry faced and met significant financial challenges in 2009,” said Greg Smith, analyst at Conning Research & Consulting. “The 12 percent hit to statutory surplus that the life industry took in the financial turmoil of 2008 was exacerbated in 2009 by the freeze in credit markets. Insurers were forced to meet their own liquidity needs by raising capital and refocusing on core operations. By the middle of 2010, surplus plus AVR was back to 2007 levels, but yields are on a downward trajectory, tempting companies to again challenge risk guidelines.”

The Conning Research study, “Life Insurance Industry Investments: Rethinking Liquidity Needs and Required Capital in 2009” analyzes life industry investments for the period 2005-2009 for the industry as a whole and for four underwriting market peer groups. Further, the study also provides detail regarding the industry’s position at the start of 2010 and how the financial crisis and changing regulations may influence insurers’ strategic investment decisions in the future.

“While life insurers were rebuilding their capital positions after the financial crisis, liquidity concerns trumped the need for investment income, and the industry built substantial cash positions,” said Stephan Christiansen, director of research at Conning. “Insurers held these substantial cash positions until the stock markets recovered and in-the-money guarantees eased. Looking forward, with emerging dynamic capital and risk analysis requirements, our modeling shows that lower interest rates may have particularly pernicious effects on capital charges relating to some asset classes supporting particular annuity products.”

Life Insurance Industry Investments: Rethinking Liquidity Needs and Required Capital in 2009” is available for purchase from Conning Research & Consulting by calling (888) 707-1177 or by visiting the company’s web site at

About Conning Research & Consulting  

Conning Research & Consulting is a division of Conning, a provider of asset management and insurance industry research and consulting services to insurers.  Conning Research & Consulting has published independent insurance industry research for 50 years, including market coverage of 30 segments of the industry in addition to industry forecasting and identification and analysis of major strategic issues. As a result of its wealth of experience and intimate knowledge of the insurance industry, Conning understands industry challenges and opportunities and provides in-depth analyses on a wide range of industry products and issues. Conning is headquartered in Hartford, CT.