Will all annuity issuers move to Bermuda?


What would you like to know

  • Accounting rules, tax bills and germs – oh, my God!
  • Maybe insurtech could help.
  • Maybe the interest rates could help.

Many Americans who are considering retirement would like to live in Bermuda, as will many life insurers who pay their annuities.

This raises a critical question that has helped shape annuity issuer coverage this year and will continue to shape issuer coverage in 2022: Will all publicly traded U.S. annuity issuers become digital nomads and eventually share? a chic beach villa in Hamilton, Bermuda? (There’s a nice one on Airbnb, set on 5.5 acres of unspoiled scenery, for $ 15,000 per night.)

The Financial Accounting Standards Board is preparing to force large US-listed life insurers to further incorporate fluctuations in the estimated value of their assets, liabilities and risk management arrangements into their quarterly earnings.

The quarterly reports that annuity issuers send to insurance regulators and rating agencies may seem as fluid as ever, but the shift to mark-to-market accounting may result in reports that investors see as the result of a battle between King Kong and Godzilla. A business can report $ 1 billion in net income one month and $ 3 billion in net loss three months later, even though the company’s cash flow, cash flow, and reserve growth are roughly the same.

Or, as analysts at Fitch Ratings put it: “Fitch expects new, more punitive GAAP accounting rules, Targeted Long-Term Improvements (LDTI), effective in 2023, to be factored into management strategies. of companies in effect in 2022. The new GAAP accounting rules represent the most significant change in the history of the life insurance industry in the United States.

Some publicly traded life insurers have responded to new accounting pressure to mark-to-market by being bought out by policyholder-owned mutual life insurers, who do not need to report their quarterly profits in the format of the generally accepted accounting principles of the FASB in the United States.

Other annuity issuers have sold to property and casualty insurers, who might have investors more accustomed to earnings volatility, or to publicly traded investment firms that have found ways to present insurers’ quarterly earnings- life in a pleasant light.

But the most popular strategy appears to be that of US-based life insurers, with earnings reports pouring into the cold light of mark-to-market GAAP on the Securities and Exchange Commission’s Edgar system, to be acquired by private equity firms based in Hamilton, Bermuda. Bermuda also has insurance regulators, and life insurers based there are still required to submit their financial statements to insurance regulators and state rating agencies.

The idea is that regulators and rating analysts are better than retail investors and mutual fund managers at seeing what GAAP does to assess wrinkles, pimples and pot belly, and to appreciate. the gracious souls of longevity risk management.

But will it turn out that consumers and financial professionals would prefer to have a better overview of mark-to-market buttons?

Here are six of the seven other key questions that should shape our coverage of the annuity market over the coming year.

Will the Build Back Better Act break rents?

Many versions of HR 5376, the Build Back Better Act, contain complicated provisions that could, for example, update the “base erosion and anti-abuse tax”.

The new updated tax on the erosion of the base and the fight against abuse could affect life insurers who have subtracted indemnity insurance or reinsurance payments from the total amount of premiums and other considerations on insurance and annuity contracts.

Other provisions will affect the loss carryforward rules.

Determining if these types of changes are big problems, minor nuisances, or non-events for annuity issuers could take time.

Will increasing longevity continue to be something people think about?

Many annuity agents and advisers work hard to help clients understand annuity risk.

The National Association of Insurance Commissioners, the Society of Actuaries and the American Academy of Actuaries strive to incorporate mortality improvement into the calculations of life insurance policies, pensions and annuities individual.

The COVID-19 pandemic, which is now almost 2 years old and continues to increase excess mortality in the United States, has raised a sobering question about the risk of longevity: what if additional waves of COVID-19 made longevity… a less common concern?

Will the new employer-sponsored annuity programs help or hurt retail finance professionals?

This will be the first year that the provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (Secure Act) that encourage the use of multi-employer pension plans and the addition of annuity features to 401 (k) plans will have a direct effect. on pension plans.

Many insurers, such as Equitable, Prudential, TIAA and Transamerica, have struggled to put in place the structures necessary to operate in the new Secure Act world.

OneAmerica, for example, recently introduced OneConnect, a program that provides the fiduciary oversight needed for a multi-employer plan program. OneAmerica notes in the program announcement that an MEP will need a trustee, common plan provider, investment monitoring trustee and federal law compliance trustee.

Life insurers, annuity agents, fee advisers who help clients with annuities, plan administrators and the like will begin to see how a Secure Act world affects them.

Will ordinary people pay for retirement planning advice when they can spend their free money on Amazon Prime without paying any fees?

The US Department of Labor is talking about reviving the old Obama-era pension advice regulations.


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