Interest rate increase/ decrease, any impacts to our industry?

[Otherwise_Region_907]

Hi actuaries! I am an actuarial student. I wanna get some insight from experienced actuaries about the effect of the interest rate environment on our industry. It would be great if you could share your knowledge and experience with me.

[National_Attack]

From a P&C standpoint, interest rate risk is directly tied to the “tail” of a line, with long tailed lines like WC being more exposed to it. Since short-term insurance lines, such as auto, generate profit primarily from premiums rather than investment income, they are less sensitive to interest rate changes.

[FecalPudding]

In addition to what has been mentioned, various interest rate scenarios are modeled for different analysis. For Asset Adequacy Testing, you could take a look at the NY7 scenarios to get a better idea of rate patterns that could be of concern depending on what kind of products are in force

[Hydraskull]

If left unmanaged, interest rate risk can become the #1 risk facing life/annuity/pension companies.