It’s been a challenging two years for the life insurance industry. It took a 12-percent hit to statutory surplus in 2008 and dealt with liquidity issues in a frozen credit market in 2009. The industry saw a little reprieve in 2010 in terms of assets, credit risks and investments. As a result however, life insurers now face a new and longer-term set of challenges from the lowest interest rates seen since the 1950s, according to a new study—“Life Insurance Industry Investments: Investigating Interest Rate and Sovereign Risk”—by Conning Research & Consulting.

The study, which analyzes life industry investments and four underwriting market peer groups for the period between 2006-'10, indicates that life insurers response to the credit crisis—increasing cash and sovereign debt holdings—now exposes insurers to other risks, especially in light of Conning’s current expectations about a long-term low interest rate environment.

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