The long-term care insurance market continues to be plagued by adverse claims experience and poor overall results, which has led to rate instability, insurer solvency concerns, and market exits by several major insurers, Fitch Ratings said Wednesday.
Fitch announced a new report, which analyzes the outlook for the LTC industry.
Based on Fitch's analysis of recent statutory financial statements, individual LTC results continue to be negatively affected by legacy blocks that incorporated pricing assumptions based on limited historical data.
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"Fitch views long-term care insurance as one of the most risky products sold by U.S. life insurers," said Managing Director Douglas Meyer. "In addition to ongoing concerns over adverse claims experience on older legacy LTC business, the current low interest rate environment presents further challenges to LTC insurers."
Over the near term, Fitch expects ongoing earnings challenges due to current low interest rates and ongoing drag associated with underperforming legacy business, which will mitigate the earnings benefit associated with more conservatively priced new business and the implementation of premium rate increases on in-force business.
The recent exit of a number of major insurers from the LTC market improves the outlook for remaining LTC writers to further strengthen pricing on new business and help facilitate the approval of in-force premium rate increases, which should have a positive effect on aggregate industry results over time.
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