Insurance Curator Long‑term care carriers warn of insolvency risk as aging demographics and historic underpricing bite
By [Reporter Name]
Who: Major life‑ and health‑insurance carriers and specialist reinsurers in advanced economies; What: escalating financial stress in long‑term care (LTC) books, widespread reserve strengthening, large block reinsurance and run‑off transactions, and repeated premium‑rate filings that carriers say are needed to avert insolvency; When: developments chiefly since 2023 and accelerating through 2024–2025; Where: primarily the United States and other high‑income markets but with consequences for global reinsurers and run‑off buyers; Why: demographic aging, rising long‑term‑care costs, historically inadequate pricing on older policy cohorts, and investment and reserving pressures have combined to push legacy LTC portfolios into sustained losses. (oecd.org)
Insurers across developed markets are increasingly treating long‑term care as a run‑off business: strengthening reserves, seeking court‑approved or administrative premium increases, and transferring blocks of legacy policies to reinsurers or specialist acquirers. Companies and their regulators say those steps are necessary to shore up solvency and protect policyholders, but industry filings and transactions also show the depth of strain and the systemic scope of the problem — from multi‑billion‑dollar reinsurance deals to legal settlements covering large swaths of older books. (sec.gov)
Demographics and the economics of care
Population aging is the structural driver. OECD and United Nations analyses show the share and absolute number of older adults are rising rapidly in advanced economies: OECD modelling projects long‑term care expenditures could “near double by 2050,” exerting sustained pressure on public and private payors. That demographic shift raises both the frequency and duration of LTC claims and uplifts the tail risk insurers must carry. (oecd.org)
For insurers that sold traditional stand‑alone LTC policies decades ago, the problem is multiple: many older‑generation policies were priced on mortality, morbidity and persistency assumptions that have since proved optimistic; interest‑rate environments that held down required premiums have reversed; and care‑cost inflation — for wage‑intensive home‑and‑facility services — has outpaced earlier actuarial assumptions. In corporate filings insurers explicitly link “historical experience” and pricing shortfalls to the need for reserve strengthening and rate increases. (investor.genworth.com)
Examples from the market: rate actions, reserve charges and reinsurance
Genworth Financial, a long‑standing U.S. writer of LTC, says a central plank of its remediation strategy is “premium rate increases and associated benefit reductions on our long‑term care insurance policies,” and the company has been pursuing multi‑year in‑force rate action programs. In its most recent annual filing the company reported hundreds of state approvals and described substantial filing activity aimed at restoring blocks toward actuarial break‑even. (investor.genworth.com)
Insurers are also recording material reserve actions. Some regulated subsidiaries have disclosed negative cash‑flow margins on LTC blocks absent approved in‑force rate actions; regulators and examiners in turn have required additional statutory reserves in multiple filings. One insurer reported recording incremental statutory reserve additions in successive years to address a negative asset‑adequacy test margin, a move that materially affected statutory capital ratios before corrective actions. (sec.gov)
At the same time, major reinsurers and specialist buyers have been active in taking on legacy LTC risk. Manulife disclosed closing two very large LTC reinsurance transactions in 2024 — a coinsurance quota share that transferred billions of dollars of invested assets and reinsured liabilities — and described them as part of “the largest long‑term care reinsurance transaction in 1Q24” and a second LTC transaction within 12 months. Carriers and reinsurers say these deals let traditional writers de‑risk and focus capital on core growth businesses while enabling run‑off specialists to manage and monetize legacy flows. (sec.gov)
The role of regulation and multi‑state rate review
Regulators and model‑law bodies in the U.S. have been adjusting frameworks to confront the LTC problem. The National Association of Insurance Commissioners (NAIC) adopted an LTC multi‑state rate‑review framework intended to harmonize actuarial standards and accelerate consideration of in‑force rate actions; companies report evaluating participation in the process while continuing to file state‑by‑state rate increases. New York’s insurance regulator has in specific cases allowed insurers to incorporate expected future in‑force rate actions into asset‑adequacy testing under strict supervisory review — a concession that has materially affected reserve calculations for some New York‑domiciled LTC writers. (sec.gov)
These regulatory accommodations are a recognition that without actuarially‑justified premium increases insurers would be forced to take still‑larger reserve charges or consider insolvency or market exit — outcomes that would impose costs on guaranty funds and fellow carriers. Filings note that state guaranty associations can levy assessments on member insurers to cover obligations of insolvent writers, and carriers model potential assessment exposure in their capital planning. (ir.athene.com)
Why underwriting and pricing assumptions failed
Industry disclosures point to several root causes. First, earlier product designs often offered generous benefit packages and inflation protection at price levels that proved inadequate once persistency, morbidity and claim duration deviated from original assumptions. Second, the prolonged low‑interest‑rate era reduced investment income available to support long‑dated liabilities, making the originally marketed premium‑investment mix unsustainable; when rates moved higher insurers faced market‑valuation losses on longer fixed‑income holdings that fed into statutory and GAAP accounting. Third, medical advances and changing morbidity patterns altered care needs in ways that were hard to model when blocks were priced decades ago. Corporate filings routinely cite combinations of “adverse actual versus expected experience,” “increased claim costs” and “reduced lapses and mortality” as drivers of unfavorable reserve development. (investor.genworth.com)
The consumer and public cost implications
Policyholders on older policies have seen repeated premium increase filings and, in many cases, benefit‑reduction offers tied to those increases. Insurers and regulators emphasize that securing actuarially justified rate actions preserves the solvency of blocks so benefits can be paid over the long run; critics argue that large retroactive premium hikes on policies sold to older, fixed‑income consumers raise fairness and affordability concerns. Several insurers have reached multi‑state legal settlements arising from alleged disclosure deficiencies around past premium increases; at least one company reported settlements that applied to a majority share of its legacy block and said their implementation reduced tail risk for the business. (investor.genworth.com)
Systemic and market‑structure responses
The market response has been multi‑pronged. Legacy writers are pursuing: (a) in‑force premium increases often coupled with benefit reduction options that policyholders may elect; (b) reinsurance and coinsurance transfers to reduce capital strain; (c) asset‑liability matching, hedging and investment strategies to improve yields; and (d) legal settlements where historic communication or rate‑increase processes were challenged. Meanwhile, new entrants and run‑off specialists (including private investors and certain reinsurers) are buying and managing closed books, viewing them as investments that, properly underwritten and administered, can deliver attractive returns. Manulife’s large quota‑share and coinsurance transactions exemplify that trend. (sec.gov)
Industry sources and filings also show carriers assessing the secondary effects: higher persistency (policyholders staying on the books) can raise liabilities; increased lapse risk following premium hikes complicates projections; and changes in accounting—both statutory and GAAP—can cause near‑term volatility in equity and capital ratios. Regulators in several domiciles require insurers to file ORSA (Own Risk and Solvency Assessment) reports and asset‑adequacy analyses that explicitly consider the impact of in‑force rate actions and the risk of failed rate approvals. (ir.athene.com)
What insolvency would mean — and how likely it is
Carriers and state regulators say insolvency remains a remote but present possibility for particularly thinly capitalized entities or companies that cannot secure rate relief, reinsurance or capital. If an insurer were to become impaired, state guaranty associations would step in to pay covered claims subject to statutory limits; firms warn that materially higher assessments could follow insolvencies and that such assessments could be material for some companies depending on their market share and the scale of any failure. Corporate disclosures routinely model and disclose potential guaranty association assessment exposure as a contingent liability. (ir.athene.com)
Industry voices and short quotes
• On pricing and remediation: Genworth told investors that “premium rate increases and associated benefit reductions…are critical to the business.” (investor.genworth.com)
• On the scale of transfers: Manulife described closing “the largest long‑term care reinsurance transaction in 1Q24” and completing a second large LTC reinsurance transaction within 12 months. (sec.gov)
• On policy‑review coordination: the NAIC framed the LTC Framework as aiming to “establish a consistent national approach to reviewing long‑term care insurance rates.” (sec.gov)
Policy options and pressures ahead
Experts and filings point to several policy and industry approaches that could reduce future systemic stress. They include: tighter product design and pricing standards for new LTC offerings; greater use of reinsurance and coinsurance to move risk to capitalized specialist buyers; clearer multi‑state regulatory procedures to streamline actuarially justified rate approvals; expanded use of non‑forfeiture or value‑preservation options to protect vulnerable policyholders; and potential public‑private partnerships or social‑insurance approaches to cover catastrophic care needs. The OECD underscores that demographic change will push public and private LTC spending higher, meaning private LTC markets will likely remain an important but volatile piece of broader care financing systems. (oecd.org)
What consumers should watch
Policyholders with legacy LTC coverage should track company filings and state insurance‑department notices about rate filings, benefit elections and transfer proposals; many states require direct notice to affected policyholders when reinsurance transactions, coinsurance transfers or run‑off sales affect contractual administration. Regulators say approved rate increases are intended to preserve the solvency of the block so policyholder benefits remain payable; consumer advocates argue for strong disclosure, low‑income relief options and careful oversight of large retroactive hikes. Filings suggest insurers expect premium burdens on older cohorts to rise materially in some cases absent public policy changes. (investor.genworth.com)
Conclusion — a structural problem requiring structural answers
The long‑term care stress now visible in insurer financials and market activity is not a short‑term accounting glitch. It is the product of decades‑old pricing, demographic shifts, and changing care economics that have collided with modern capital and regulatory realities. Insurers, regulators and market participants are responding: by seeking rate relief, strengthening reserves, structuring reinsurance and attracting run‑off capital. Those actions can stabilize the industry but also produce near‑term consumer pain in the form of higher premiums or reduced benefits. Absent broader reform of how societies finance aging and care, the insurance industry’s adjustment may continue to be both painful and protracted. (oecd.org)
Sources: Company annual reports and SEC filings from Genworth Financial and Manulife Financial; U.S. insurer statutory and management discussion filings; OECD report on ageing and long‑term care expenditure projections; NAIC long‑term care rate‑review materials and company public filings (see cited documents).