As Rates Rise, Investment Strategies Must Meet IMR Challenges
As Rates Rise,
Investment Strategies Must Meet IMR Challenges
Investment Strategies Must Meet IMR Challenges
Survey of U.S. Insurers
The recent upward turn in interest rates has been long-awaited by life insurers, but it also poses portfolio management challenges as realizing losses could impact balance sheet strength.
The Interest Maintenance Reserve (IMR), a 30-year-old accounting standard, helps smooth insurers’ annual income amid changing market conditions. As insurers sell current bonds to purchase higher-yielding ones, the losses should reduce IMR values. However, an IMR that turns negative will directly reduce capital and surplus, and insurers concerned about reducing these critical financial health measures may be wary of taking opportunities to improve portfolio yields and long-term economic value.
Conning’s Jeremy Lachtrupp and Matt Reilly explain IMRs, the potential impact on life balance sheets and considerations for insurers in developing investment strategies in the Conning Viewpoint “As Rates Rise, Investment Strategies Must Meet IMR Challenges.”
The Interest Maintenance Reserve (IMR), a 30-year-old accounting standard, helps smooth insurers’ annual income amid changing market conditions. As insurers sell current bonds to purchase higher-yielding ones, the losses should reduce IMR values. However, an IMR that turns negative will directly reduce capital and surplus, and insurers concerned about reducing these critical financial health measures may be wary of taking opportunities to improve portfolio yields and long-term economic value.
Conning’s Jeremy Lachtrupp and Matt Reilly explain IMRs, the potential impact on life balance sheets and considerations for insurers in developing investment strategies in the Conning Viewpoint “As Rates Rise, Investment Strategies Must Meet IMR Challenges.”
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| © Conning Holdings Limited 2024. All Rights Reserved. Securities are offered through Conning Investment Products, Inc., One Financial Plaza, Hartford, CT 06103 an affiliated broker-dealer. Member of FINRA / SIPC. |
© Conning Holdings Limited 2024. All Rights Reserved.Securities are offered through Conning Investment Products, Inc., One Financial Plaza, Hartford, CT 06103 an affiliated broker-dealer. Member of FINRA / SIPC.
