Life Insurance Quotes

Bond interest rate reduction wounds insurers

09/23/11

The recent U.S. Federal Reserve Board's reduction of long-term interest rates had a significant impact on the Canadian life insurance market, according to the Wall Street Journal. U.S. bond interest rates dropped Thursday to 2.78 percent for a long term bond while shorter term bond interest rates fell to 1.75 percent, the lowest level in 70 years.

Financial experts throughout North America expect disappointing third quarter financial numbers following what was an encouraging second quarter in the life insurance and annuities market. Major insurance companies' profits suffer when they invest assets in maturing bonds at lower rates, narrowing their profit margin. Large Canadian Insurers, like Manulife, are not in any immediate danger because the existing strength of their capital is enough to weather a hit like the bond interest rate reduction.

"They have got a lot of capital, and they're probably OK for today, but the way the environment is unfolding, you can't rule anything out, and that's how the market is reacting as well," Robert Sedran, a financial services industry analyst at CIBC World Markets Inc., told the source. "It all depends on the nature of the storm."

According to a 2010 LIMRA study cited by the Insurance Information Institute, only about one out of every three Americans has individual life insurance coverage, the lowest level in 50 years.

Talk to an Advisor

A licensed insurance advisor can explain your options and help you choose the right life insurance for your needs.

Call: 1-800-823-4852

Chat: Live Advisor Chat

Sm

A few of the carriers we quote