Life carriers' risk controls under scrutiny

Insurers are girding for a flurry of questions about their risk management from broker-dealers and advisers whose interest has grown following the economic bust. “We're getting more-detailed questions from [broker-dealer] firms on risk management,” said Steve Kluever, vice president for annuity product and marketing at The Hartford Financial Services Group Inc. Though advisers trust their broker-dealers to perform due diligence on their carriers, they are still interested in hearing about hedging firsthand, he noted. Mr. Kluever, along with a slate of insurance executives, spoke last week on a panel hosted by the Insured Retirement Institute in New York City. While most variable annuity sellers have bounced back from 2008, questions from financial advisers continue to swirl — especially as variable annuity sales become increasingly concentrated among a handful of players: Prudential Financial Inc., MetLife Inc. and Jackson National Life Insurance Co. “We're looking for more actuarial information, information on reserves,” said Steve Manley, vice president of wealth management at Janney Montgomery Scott LLC. His broker-dealer has a group that performs due diligence on life insurers and passes the information on to advisers. “Some of the information we get is limited; that education is in its infancy,” Mr. Manley said. Mr. Kluever noted that he has held meetings with as many as 200 advisers to talk about hedging strategies for carriers. Prior to the crash, few would have attended, he said. Prudential Annuities launched a continuing education course on risk management in January, said Bryan Pinsky, senior vice president of product development. Concerning variable annuity concentration risk, he said the company would “prefer to have the lower market share of a growing pie.” Meanwhile, Mr. Kluever noted that The Hartford, a former top seller of variable annuities that was dinged by the business in 2008, wants to get back in. Its breadth of businesses includes retirement plans, life insurance and other products. “It's healthy to be well-diversified,” Mr. Kluever said. E-mail Darla Mercado at [email protected].