2022 US Life Insurance & Annuity Market Report

2022 US Life Insurance and Annuity Market Report

A time of transition for the U.S. life insurance and annuity industry, driven by changes in Federal Reserve interest rate policy, the ongoing evolution of the COVID-19 pandemic and a broad push towards balance sheet optimization carries a range of implications for different aspects of the business. Find out what's next for the industry in our annual market report.

If you are a client of S&P Capital IQ Pro, you can access the complete 2022 US Life Insurance and Annuity Market Report here. Receive complimentary access to the executive summary here.

Key findings include:

The U.S. life and annuity industry, benefitting from some easy pandemic-era comparisons, overcame challenges associated with low interest rates in 2021 to produce its highest rate of growth in direct premiums and considerations in a decade. Interest rates will provide a tailwind in 2022, which we project will help the industry to continue to generate well-above-average expansion, if not quite at the same level as in 2021.

Rising interest rates will most benefit the ordinary individual annuity business — an outlook reinforced by surging spring 2022 sales of various categories of products. Our optimism for premium growth is tempered to an extent by disintermediation risk, or the potential for annuitants to surrender in-force contracts with greater frequency given the extent to which rates have risen.

The ratio of death benefits to net premiums in the life insurance business will finally tail off from the elevated levels of 2020 and 2021, but not before 2022’s result remains elevated due to high COVID-19 mortality in the first quarter.

The role of reinsurance in the life and annuity space will continue to increase as rising rates will not forestall the industry’s push towards more capital-light business models. Large transactions effective in the first half of 2022 will contribute to high levels of ceded premiums for the full year even to the extent that new deal volume slows amid market volatility.

Should the U.S. economy enter recession, our projections for growth in the latter part of 2022 and into 2023 may prove optimistic. It would also bring increased scrutiny to investment portfolios that had been constructed to trade incremental credit and liquidity risk in exchange for higher yields.

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