OLDWICK, N.J.--(BUSINESS WIRE)--AM Best believes that legislation to bolster retirement security that is making its way through Congress would expand market opportunities for the retirement and employee benefit segments of the U.S. life industry.
The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) recently passed in the U.S. House of Representatives and now heads to the Senate, which is considering a similar bill. The two bills, which have a number of very similar key provisions designed to promote retirement security in the United States, could offer broader market opportunities for in-plan annuities to the U.S. life/annuity segment and spur expansion of 401k plans in the smaller employer markets.
In a new Best’s Commentary, titled, “SECURE Act Offers Opportunities for Annuity Providers,” AM Best states that the relaxation of fiduciary standards in both bills represents an opportunity for U.S. life insurers. In particular, a safe harbor provision would allow plan sponsors to select insurers to provide guaranteed income solutions, and then protect those sponsors from liability should participants or their beneficiaries suffer losses due to the insurer’s inability to satisfy its financial obligations under the contract terms.
In the U.S. marketplace, less than 50% of plan sponsors offer an in-plan retirement income option, and just 20% offer a guaranteed income product. AM Best believes that greater participant awareness of lifetime income is an important step in enhancing retirement security and will provide plan participants with a way to translate retirement assets from the accumulation phase to drawdown over their lifetime. Insurers with large employee benefit segments and insurers that manage retirement assets stand to benefit the most from these proposed changes.
In addition, AM Best believes the ability to offer in-plan annuities as part of 401k plans will provide opportunities for the industry to grow its individual annuity business. However, the industry’s risk profile will increase due to the growing exposure to longevity risk, which has risen due to the rapid growth of the group pension risk transfer market in the United States. Despite uncertainty as to how many small employers will adopt a plan, the growth potential is significant, as roughly 36% of the U.S. workforce is employed by small businesses.
To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=287307.
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