America’s life insurance industry is a powerful economic engine for our nation.
Life insurers take premium payments from consumers and make long-term investments so they can keep their promises to their policyholders. These funds are strategically invested in stocks, bonds and other assets across the United States, providing businesses with valuable investment capital that companies can use to expand facilities, spur innovation and increase employment.
Life insurers also invest in state and local municipal bonds supporting transportation, utilities, and other capital improvements, which are critical for fueling economic development.
All told, life insurers have $8.0 trillion invested across the nation in all 50 states. In rural communities, rapidly growing suburbs and well-established urban centers, life insurers’ investments provide the bedrock foundational capital that governments and businesses can count on.
But there are some trouble spots on the horizon that could interfere with these investments by life insurers. As Congress makes decisions about how to extend tax relief for individuals and businesses in 2025, it is critical that its actions support life insurers’ ability to provide this economic enrichment.
Life insurers have consistently invested in American bonds and other debt instruments, even during the historically low interest environment during the last 10-plus years. The more recent spike in interest rates, however, has left many insurers’ long-duration bond portfolios in an unenviable financial position. However, a technical change by Congress to the tax code to bring insurers in line with banks would greatly lessen the pressure on insurers to sell these underperforming low-interest rate assets.
At the same time, blanket tax code changes for all industries can have unintended consequences on life insurers.
Life insurance companies are taxed differently than other industries. This long-standing tax treatment reflects life insurers’ unique and essential role of generating revenue while making ironclad guarantees to provide benefits to families and businesses without knowing whether these benefits will be paid next month, next year or several decades from now.
Only life insurers can trade a customer’s risk for a promise of protection. Protection from financial devastation after the loss of a breadwinner. Protection from outliving one’s savings. Protection from a disabling injury or illness. Life insurers provide an unmatched private-sector financial safety net for American families that bolsters important government programs such as Social Security.
Congress must ensure that any new tax measures contain “stabilization” features, so tax code changes wouldn’t disproportionately hit the life insurance industry. These measures would recognize and support the industry’s distinctive role in American business and society. And they would help ensure that life insurers can continue to protect families and drive economic growth and jobs across the United States.
David Chavern is President and CEO of the American Council of Life Insurers (ACLI) whose mission is to provide financial certainty to Americans regardless of where and how they work, their life stage, or the economic status of their household. ACLI’s 275 member companies represent 93 percent of industry assets and provide financial security products and services to 90 million families.
