Impact of Rising Interest Rates on Insurance Companies Call for Essays
Background and Purpose
Over the past 18 months, the economy has seen a rise in interest rates not felt for many years. Rising interest rates can have several effects on the economy. They can reduce consumer spending and business investment since borrowing becomes more costly. This can lead to slower economic growth or even a contraction. Additionally, higher interest rates can impact the housing market by increasing mortgage rates, making it more difficult for people to afford homes, and potentially slowing down the housing sector.
However, rising interest rates can also have positive effects on the economy. They can attract foreign investors seeking higher returns on their investments, which can strengthen the currency and improve the country's financial stability. Higher interest rates may also encourage saving, as individuals earn more interest on their deposits, which can lead to increased capital available for lending and investment in the long run.
Rising interest rates can also impact insurance companies in a variety of ways. This raises an immediate question: Are rising interest rates bad, good, or both for insurance companies?
With this in mind, the Investment Section’s Committee on Finance Research has issued this call for essays to explore this issue from a variety of aspects.
Sample Topics of Interest for Essays
The Investment Section’s Committee on Finance Research seeks essays that address the various impacts of rising interest rates on insurance companies. This call for essays has been deliberately written broadly to allow respondents the flexibility to address this topic from one or more perspectives and approaches. Respondents are free to choose from one or more of the following sample topics below or propose others that fall within the scope of this call. Please note that the list is not meant to be exhaustive but merely examples of proposed topics that may be considered. Respondents are welcome to address other questions or topics that fall under the general scope of this call for essays.
Sample topics include:
- What types of investment and hedging strategies implemented during the long period of low prevailing rates worked particularly well as rates quickly moved upward? Which worked poorly?
- Have accounting standards accurately reflected the efficacy of hedging and investment strategies, or are there disconnects between the economics of strategies and hedges and their realization in financial statements?
- How are companies positioning their liability-based investment portfolios in the current environment? How about surplus and capital accounts?
- If insurers maintained robust asset-liability management practices in the past, to what extent have these worked well given the rise in interest rates and embedded options in many insurance products?
- What types of insurance company products are most able to take advantage of higher rates and bring in new premium?
- How might companies be benefiting or losing from the changing cost of hedging?
- How does the impact of rising rates on companies compare for those operating in different regulatory/reporting regimes? e.g., US Statutory compared to Canadian practices.
- Are companies taking any actions outside of “typical” portfolio management strategies to take advantage of higher rates? Where are the opportunities?
- How do rising rates affect asset allocation and investment choices, particularly with regard to liquidity needs, embedded options, etc.?
- What opportunities and challenges do insurance companies face with regard to the inverted yield curve?
Rules for Submission of Essays
Timeline
The deadline for submissions is November 30, 2023. Essays will be published as soon as possible in a formal collection later in the year.
Length and Instructions for Submission
Essays must be submitted in English with a desired length between 500 to 2,500 words. There is no requirement for formal or extensive footnoting.
Author information must be submitted with the essay and include name; credentials or designations (if appropriate); title; organization/company; e-mail address; and phone number. Please provide all author information at the beginning of the essay.
Essays that contain overt political statements, commercial content, and other inappropriate material will not be accepted. Articles must comply with the SOA's antitrust guidelines.
Please submit your essay via e–mail to: Research-AR@soa.org
Awards
Up to $5,000 in award money has been allocated for this call for essays. The review committee will select the leading essays and determine how to allocate the award money among them. Consideration will be given to creativity, originality and the extent to which an idea might help promote further thought in this area. In exchange for award money, selected authors will be required to assign all copyrights in their essays to the Society of Actuaries Research Institute.
Authors are ineligible for awards if an essay is based on an SOA Research Institute-sponsored and funded research study conducted by the author. However, authors are welcome to submit such essays for publication consideration.
Publication and Presentation
Depending on how many essays are received and the range of the topic areas, a suitable format for electronic publication and dissemination will be selected. Essays may also be presented at an SOA meeting, webcast, or other professional development event.
In addition, other venues for publication or presentation of the ideas outside of the Institute will be considered. It is hoped that publication of the collected essays will further knowledge and stimulate discussion as well as promote future efforts in this area.
Rights Granted
Please understand that by submitting an essay for consideration, the essay author(s) is granting to the Society of Actuaries Research Institute an unlimited license to print or republish their essay, with proper attribution given to the author(s).
Questions
Please direct any questions regarding this Call for Essays to: Research-AR@soa.org