Managing Life Insurance Closed Blocks: A 2016 Update

by Karen Monks,  Jamie Macgregor, March 30, 2016
Industry Trends
EMEA, North America


Factors such as low investment returns, management distraction, and increasingly higher costs to administer shrinking blocks are leading insurers to question what they should do about products that they no longer consider strategic.


This is Celent’s second look at closed blocks in life insurance. Since our original report, US insurers have not closed blocks at the pace they did prior to our 2012 report. This report will update the 2012 analysis. It will also update the exit strategies an insurer may take in regards to the administration of these closed books of business as they turn into “run-off” businesses.

Closed blocks (or books) are defined as policies that are no longer sold actively, but are accounted on the financial statements of a life carrier as premium-paying policies. The long-term run of life insurance makes it hard for insurers to see the immediate need for a long-term closed block strategy. A strategy of handling closed blocks internally to contain costs and manage the run-off makes sense for closed blocks that reside on the same policy administration systems to the open blocks. However, as insurers upgrade their policy administrations systems, implement digital strategies, and look to rationalize systems, the cost administering a diminishing closed block increases as does the risk of technology obsolescence.

“Each time an insurer opts to close a block of business it is faced with management and administrative challenges. For the most part, closed blocks are considered a drain on the company's capital, but there are many other challenges that the insurer must overcome or at least mitigate,” says Karen Monks, an analyst with Celent’s North American Insurance practice and coauthor of the report. “It finally seems that these challenges are forcing insurers to make decisions on their closed blocks.”

“Since 2012 the outward view shows that insurers are divesting their closed block businesses, specifically selling them to reinsurers,” says Jamie Macgregor, senior vice president of Celent’s Insurance practice and coauthor of the report. “However, given that only a dozen or so deals took place in the last three years, Celent believes the dominant strategy remains an internal run-off supported by a reinsurance deal.”

This 16-page report contains one table and three figures.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

Executive Summary



Key Research Questions





Key Research Questions





Revisiting the Challenges, Strategies, and Options Associated with Closed Blocks


Current Closed Block Activity



Strategies and Options



Closed Block Strategic Activity Since 2012


Final Thoughts



Advice to Insurers



Advice to Suppliers of Solutions





Internal Challenges



External Challenges


Leveraging Celent’s Expertise



Support for Financial Institutions



Support for Vendors


Related Celent Research


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