The last few years have presented no shortage of challenges for life insurers. While investment portfolios decimated in the financial crisis have begun to recover, the year ahead is sure to bring new hurdles. 

One of the highest will be how the industry deals with the new influx of business expected due to the re-imposition of the estate tax. After a year’s hiatus, a levy of up to 55% on estates valued at more than $1 million will go into effect as of Jan. 1, 2011.

The expected onrush of new business will challenge both life insurers and their reinsurer partners, notes Clark Troy, a senior analyst with Aite Group.

“As the U.S. estate tax impasse resolves one way or another in 2011, a strong year for life insurance products oriented toward estate planning may be in the offing,” he says. “This should drive increased volume in life reinsurance, and may provide impetus for process improvements in the segment.”

Indeed, a new report Troy authored, “Life Reinsurance Pain Points,” examines the technology issues that often complicate the relationship between insurers and reinsurers.

Troy says many of the core difficulties derive from the low degree of automation in place at life insurance companies, as well as from insurers’ continued use of siloed mainframe platforms to provide various products. Additionally, a lack of broadly implemented standards for common data feeds and processes further impedes effective data exchange and process improvements between the two parties.

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Corrected November 22, 2010 at 10:15AM: yes