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Navigating the closed blocks landscape: EY US Life Insurance & Annuity Survey

Explore the current landscape of closed blocks in life insurance and annuity (L&A) and how insurers can approach this industry challenge.

Co-authored by Phil Ferrari, Biju Sidhartha Menon and Marshall Lin.

In brief
  • Several factors have led to subpar performance in general — across both capital and technology and operational efficiency — when it comes to closed blocks.
  • L&A carriers need to reimagine their closed blocks landscape and embrace a more holistic approach.

 Closed blocks are defined as policies that are no longer sold actively but are accounted for by life and annuities (L&A) carriers as premium-paying policies on their financial statements. With more than $2.4 trillion in liabilities under management and more than 150 million policies, closed blocks management in the US presents several challenges as well as opportunities to insurers and reinsurers. The escalating costs and diminishing returns have meant that carriers of closed blocks have dealt with the challenge of running operations with scant margins over an extended period. Technology debt, along with increasing talent and operational risks, has further challenged the landscape. Also, closed blocks are not considered to be strategic for the typical insurer (not counting aggregators). They still need to dedicate capacity toward servicing these closed blocks, which is often a distraction of focus from strategic areas. Further, improving or achieving effective returns on the capital has also proved challenging to many. A clear and comprehensive approach toward unlocking the full value of closed blocks is missing in the industry today.

There is a dearth of organized and reliable data on closed blocks when it comes to value and capital, product types and complexities, technology and operational challenges. The EY US Life & Annuities Insurance Survey invited a group of select mid- and large-sized insurers and reinsurers to better understand the closed block landscape across seven key dimensions: strategic intent, products, capital, expense, technology, operations and experience.


Our study reveals a set of key challenges for insurers that need to be overcome, provides a snapshot of where the industry stands today on closed blocks, and captures the points of view and perceptions on the topic across multiple leadership and functional positions. Our research findings will help insurance companies, annuity providers, reinsurers and aggregators to better understand where they are vis-à-vis the industry and help them begin to rethink their approach. The cost of doing nothing, as the survey clearly showed, can be rather high.


Key findings

  1. Significant locked-in capital with subpar returns coupled with siloed operations and bloated operating costs indicate the need for greater efficiency.
  2. The complex technology landscape highlights the need to mitigate legacy risks and drive consistent customer experience.
  3. The L&A insurance industry needs to approach closed blocks from a holistic point of view, carefully considering the various nuances straddling across capital, product complexity, operating models and technology risk.

Download the full survey report


Life insurers should proactively assess their strategic options when it comes to closed blocks. Cost and regulatory pressures are unlikely to go away, and the longer an insurer takes to decide on next steps — legacy technical debt will also continue to accumulate, making the landscape even more complex and fraught with risks.