The heads of two large life insurers said today that their companies are resisting pressure to take much more interest rate or credit rate risk to boost investment yields.
Roger Crandall, chief executive officer of MassMutual, and Ted Mathas, CEO of New York Life, talked about their companies' cautious search for yield at a CEO panel at an insurance industry conference organized by Standard & Poor's. Economists at an earlier conference session speculated about when rates might move higher.
"The big shift isn't in portfolios," Crandall said. "It's in what liabilities look like."
When rates are low, MassMutual avoids having to chase yield by offering consumers fewer long-term guaranteed, the MassMutual executive explained. Crandall argued that one factor that is exaggerating the effects of low rates and the recent Great Recession, especially on defined benefit plans, is pressure to move to "mark to market" accounting rules, or rules that may require insurers to value assets at current prices, even in a crisis in which the markets are functioning poorly.