timothy c. pfeifer, fsa, maaa pfeifer advisory llc april 8, 2014 2014 life insurance conference
TRANSCRIPT
Timothy C. Pfeifer, FSA, MAAAPfeifer Advisory LLC April 8, 2014
2014 Life Insurance Conference
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Life Insurance only, not annuities
Structuring life insurance product design for success in a fluctuating interest rate environment
Emphasis on new business sales, though nothing happens in a vacuum
Succeeding in a Fluctuating Interest Rate Environment
Variable UL Indexed UL
Term Products Group Life Line Combo Features
Non-Participating Whole LifeGuaranteed UL
Accumulation-Oriented UL Current Assumption UL
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Succeeding in a Fluctuating Interest Rate Environment
More Emphasis on Less Interest-Oriented ProductsMore Emphasis on Less Interest-Oriented Products
De-emphasize Interest-Oriented ProductsDe-emphasize Interest-Oriented Products
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Succeeding in a Fluctuating Interest Rate Environment
Configuring the load structure on Universal Life to balance interest, expense,
and mortality margins
Broad contractual language permitting changes in policy non-guaranteed elements, along with expansive definitions
If feasible, structure participating versions of products to take
advantage of dividend flexibility
Share interest rate risk elements with reinsurer or
investment partner
Construct investment portfolios with some ability to re-allocate in the face of interest rate movements
Products built with small interest margin requirements balanced against products with larger interest margin requirements
Products which compete relatively better in rising rate scenarios versus
falling rate scenarios
Explicit macro hedgingExplicit macro hedging
Purchase alternative assets less exposed to interest rate fluctuations (e.g., natural resources)Purchase alternative assets less exposed to interest rate fluctuations (e.g., natural resources)
Perform “Product Hedging” at a product portfolio level, and within a product typePerform “Product Hedging” at a product portfolio level, and within a product type
Reduce policyholder liquidity options for some productsReduce policyholder liquidity options for some products
Lower guaranteed interest, raise guaranteed expense loads, constrict some premium flexibilityLower guaranteed interest, raise guaranteed expense loads, constrict some premium flexibility
Add direct interest-linked products to the portfolio (e.g., credited rate is a function of yield curve)Add direct interest-linked products to the portfolio (e.g., credited rate is a function of yield curve)
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Seek Down Market Opportunities
Seek Down Market Opportunities
Distribution Control and Education
Distribution Control and Education
Pricing with Future Bias as to Interest Rate Movements
Pricing with Future Bias as to Interest Rate Movements
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Relative Risk Weighting Between Equity and Interest
Rate Risk
Relative Risk Weighting Between Equity and Interest
Rate Risk
Inforce versus New Business
Competitiveness
Inforce versus New Business
Competitiveness
