Long-term interest rates have remained at historic lows for several years.
What started as a knee-jerk response by central banks to keep consumers spending and mitigate the effects of a worldwide recession has turned into a trend.
Persistently weak economic indicators, and dragging jobless recoveries, continue to suppress both bank and long-term bond interest rates in the world’s safer countries. And there’s no sign of when the trend will turn.
All that’s spelled trouble for insurers, which traditionally pull a high percentage of the cash they need to fund obligations from fixed-income markets. So-called long-tail products, which provide incremental payout guarantees to policy holders, have long been the preferred vehicle for Canadian insurance consumers.
But suppressed rates have made those guarantees hard to, well, guarantee.
In response, some companies have ceased issuing certain types of products, exited certain lines of business, or tweaked terms to make payouts possible.
Here’s a rundown of changes since the beginning of this year:
January 2012: Transamerica cuts shelf to focus on life
April 2012: Standard Life to suspend GLWB sales
June 2012: Say goodbye to GMWB as you knew it
June 2012: RBC exits permanent insurance
July 2012: Assumption Life products on chopping block