Monday, April 20, 2009
Prudential, Hartford, Other Life Insurers May Be Selling Away Their Future
...Guaranteed variable annuities are an easy sell to baby boomers looking for certainty in retirement, but they require insurance companies to juggle a series of put options and complex structured securities that revolve around stock prices and mortality. Much like the role subprime mortgages played in banking, these guarantees helped insurers boost sales and gain market share while times were good. But they also left life-insurance companies exposed when the music stopped.
For instance, insurers have been desperately trying to hedge away the risk they assumed on their customers’ behalf — and that worked fine so long as the market remained calm and hedging was cheap. But the cost of hedging rises exponentially with market volatility, crippling insurers’ ability to offload the risk...
BNet: Prudential, Hartford, Other Life Insurers May Be Selling Away Their Future
For instance, insurers have been desperately trying to hedge away the risk they assumed on their customers’ behalf — and that worked fine so long as the market remained calm and hedging was cheap. But the cost of hedging rises exponentially with market volatility, crippling insurers’ ability to offload the risk...
BNet: Prudential, Hartford, Other Life Insurers May Be Selling Away Their Future
Permalink posted by markw @ 4:38 AM 
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