When once in a century happens twice in 13 years

Are you tempted to dismiss 2020 experience data for your current assumption development work?  Be careful!  Let’s look back to this century’s FIRST once in a century event, the Global Financial Crisis of 2007-8, and see how things turned out after that.

Ruark 2010 studies
Surrender rates fell by about half during the crisis and have not returned to prior levels.  The prevailing opinion is that policyholders curtailed financial activities in favor of watchfulness.  A combination of low interest rates and product de-risking means that fewer attractive alternatives are available.

Ruark 2011 studies
The reduction in surrender rates during the crisis has evolved into flatter subsequent rates.  The in-the-money effect, as owners have higher persistency when they perceive more value in annuity guarantees, is still strongly evident, with convincing evidence for a different regime now versus prior to the crisis.

Ruark 2012-13 presentations
Dynamic moneyness relationships have not been stable through the recent crisis — in fact, sensitivities have increased.  For many years, policyholder behavior risks were not a major concern, until they were.  Here are a few biggies from the public disclosures…

2011:  CAD 300m
2012:  USD 300m
2012:  EUR 600m
2012:  USD 1,100m

What is your company doing to understand and manage policyholder behavior risks?  Do you put as much into this as for management of capital markets risks?  Would you say that you are ahead of the pack?  Would you like to be?  What might this look like?

Ruark 2020-21 studies and presentations
ANOTHER once in a century event, for product risks that are highly sensitive to market crises?!  Yikes.  Dismiss 2020-21 data at your peril.

So don’t miss out on our 2021 VA policyholder behavior studies which are on schedule for completion by June 30, with data through year-end 2020.  Please contact me if you have not already submitted your order form.  And triennial VA mortality study is on the way in the fall, and 2021 FIA studies are still fresh since February.

Still not enough?
Thanks to Tamiko Toland and the good folks at CANNEX for including me in their interview series here.  Full video, brief clips, and Q&A document.