Key takeaways

• Indexed and variable universal life (UL) products now make up a larger share of the overall individual life market, while fixed and guaranteed product sales have declined.
• For term products, the net premium reserve (NPR) has emerged as the prevailing reserve for most life insurers, which has created reserve redundancy and retrocession opportunities for reinsurers.
• Shifts in the U.S. population correlate with demand for term products, while Census data similarly suggests a growing market for final expense policies.
• While new business for fixed UL products with guarantees has declined, in-force UL with secondary guarantees (ULSG) policies continue to present challenges for direct carriers but may offer additional opportunities for reinsurers.

Introduction: Pressures facing U.S. life insurance companies

In recent years, the U.S. life insurance market has faced both macro and sector-specific headwinds. Like companies in other industries, life insurers have grappled with higher inflation and interest rates—as well as questions about how long these conditions would last—in addition to geopolitical unrest, domestic policy uncertainty, and the ever-growing importance of data security.

Meanwhile, life insurance companies in particular have faced mounting competition and limited capital. Many firms have undergone significant systems upgrades. And the pressures of legacy block administration and the expanding roles of both active—and activist—investors seem poised to transform the industry.

This article reviews what changed between 2019 and 2024 and highlights some potential trends that may guide the industry forward.

Indexed and variable UL products expand their market share

Market share of the individual life business has shifted over the past half-decade. According to data from LIMRA, UL, particularly indexed UL (IUL) and variable UL (VUL) products, expanded to a combined 42% of the business in 2024, up from 30% in 2019. During the period, the fixed and guaranteed UL market slid from 12% to 6% of the market.

Meanwhile, as shown in Figure 1, the traditional segment of the market—term and whole life—appears to have shrunk in comparison to the relative growth of IUL and VUL policies. But while these products now represent a smaller portion of the total pie, they have continued to grow on an absolute basis. Overall, while year-to-year shifts were incremental, the change in market share over the past five years suggests the individual life business has continued moving in a direction insurers have observed for some time.

Instead of driving insurer strategy, IUL pricing reflects it

As IUL market share expands, insurers are facing multiple competing pressures:

• Illustrations drive sales—but are not to be considered contractual promises.
• Thoughtful allocation of asset portfolio earnings to IUL policy index strategy cohorts is essential to be fair to policyholders and realize expected earnings.
• Although IUL is a long-duration contract, it generally consists of a series of one-year promises via index account specifications.
• Policyholder behavior affects duration—flexible premium patterns mean that the company is at the behest of its collective policyholders for the resulting liability duration, challenging the company’s asset-liability management capabilities.

Each of these challenges is in itself significant, and a company’s overall philosophy on these should factor into its approach, as well as the design and pricing of each product. For the pricing actuary, this is likely a major change from the historical approach. Previously, a pricing actuary would design how a product works, then leave it to other valuation and in-force management actuaries, information technology professionals, and other colleagues to bring the product to life.

Today, these challenges, among others, have made the IUL business more complicated and circular than in the past. It is no longer practical for the pricing actuary to establish the product design at the outset, because a changing marketplace requires a more adaptive approach, and the way the in-force business will ultimately be managed should be reflected in the initial product price. Thus, more than any other life product, IUL pricing is a reflection—rather than a determination—of a company’s policies regarding non-guaranteed elements, asset-liability management, and marketing strategies.

ULSG in force blocks present risks and opportunities

Looking again at Figure 1, ULSG policies made up 5% of the individual life market share in 2019; by 2024, that share had fallen to just 1%. This decline was driven by multiple risks and challenges affecting these products, including the following.

• Policyholder behavior: Original pricing for ULSG products often assumed higher lapse rates than what has occurred, leaving carriers to pay higher death benefits than they had anticipated and compressing their profit margins. Changes in understanding of stranger-owned life insurance products also have influenced insurers’ perspectives on policyholder behavior and their liabilities.
• Capital commitment: Having these policies on the books longer than expected has tied up insurers’ capital for longer than planned, preventing investment in other areas of the business.
• Availability and cost of yearly renewable term (YRT) reinsurance: Some carriers have attempted to mitigate the unexpectedly low lapse rates by seeking YRT reinsurance coverage. However, over the last five to 10 years, reinsurers offering coverage have been rethinking their own pricing, posing challenges to all parties involved in these transactions.
• Administration risk: ULSG product specifications are often quite detailed and complicated. If an insurer’s administrative systems do not precisely track all policy components, any discrepancies may quickly snowball and expose the firm to legal and financial risks.
• Modeled reserve issues: The complex nature of ULSG policies prompted various reserve requirement changes during the years when these products were popular. Some of those reserve calculations used model-based reserves that set a floor for how much reserve is required to be held. Therefore, any company interested in acquiring this type of business needs to be aware of what the modeled reserves currently are and what they could be in the future, because the amount could be material to the capital requirements and profitability of the business going forward.

While these headwinds have largely deterred direct carriers from writing new ULSG business, substantial in-force blocks remain on their books, creating potential opportunities in the reinsurance market.

New reinsurance opportunities emerge in the term market

Additional reinsurance opportunities can also be observed in the term market, thanks to the increasing prominence of business under principle-based reserving (PBR).

PBR, governed by the NAIC Valuation Manual, Chapter 20 (VM-20), for life insurance since 2020, is a relatively new paradigm under which insurers hold the greatest of three reserves: deterministic reserve (DR) and stochastic reserve (SR), which are principle-based model calculations, and NPR, a more formulaic-based calculation comparable to what was used before PBR took effect. According to Milliman’s 2025 Term Survey, NPR is now the prevailing reserve used by insurers for term products.

As illustrated in Figure 2, the survey findings show that throughout a 20-year term policy, but especially in a policy’s early years, most companies use NPR. This creates a reserve redundancy, with the formulaic NPR generating a higher reserve than what the modeled principle-based approach—which also includes margins on best estimate reserves—might indicate.

Prior to the adoption of VM-20, insurers would often find similar redundancy, compared to their views of the economics of the business, in formulaic statutory reserves. Insurers focused on capital optimization would look for ways to finance this redundancy. Nominally, a principles-based approach would theoretically reduce or eliminate such redundancy.

Entering the PBR era, companies were thus unsure whether there would be any remaining redundancy to finance within the new paradigm. The results of the Milliman survey now suggest a strong likelihood of redundancy in term blocks, especially in early durations. This will likely continue to create opportunities for reinsurers to provide reserve and capital relief to direct writers through financial reinsurance.

Population demographics drive life insurance product trends

Hints at further growth opportunities for the life industry may be apparent in demographic data. For instance, when tracking the historical target market for term policies—the portion of the U.S. population between the ages of 30 and 49—a clear correlation is evident between the size of this age group and the premium volume of term policies sold, as shown in Figure 3. For example, in 2013 there were approximately 83 million people ages 30 to 49 and $2.4 billion in term sales; in 2023, that age group increased to more than 88 million while term sales rose to $2.6 billion.¹ This consistent pattern suggests insurers may wish to review Census data to set expectations about future market size and sales potential.

Similar analysis of demographic trends also reveals another opportunity for growth: final expense life insurance. As the name suggests, the final expense market is a general product that provides coverage amounts intended not as income replacement for working-age individuals but instead smaller amounts to cover common expenses incurred by spouses or heirs in managing the loss of a loved one. As the percentage of the U.S. population older than age 60 increases, as shown in Figure 4, the market for final expense has continued to expand, driving the overall growth of whole life products. According to LIMRA, new annualized premium for final expense policies surged 16% between 2023 and 2024, when sales topped $1 billion.²

What might the next five years look like for U.S. life insurers?

This article presents only a high-level look at the U.S. life insurance industry between 2019 and 2024, years marked by unusual events including a global pandemic, a sudden spike in inflation, sustained high interest rates, and mounting domestic and international political turmoil. Still, some clear market patterns have emerged, including the prevailing use of NPR and the existence of potential reserve redundancy on term products, as well as population shifts that may suggest growing markets for term and final expense products. While continued uncertainty is likely to affect the future macro environment, these trends may help guide life insurers’ business strategies as they navigate the next five years and beyond.

¹ Data from LIMRA and www.census.gov/data-tools/demo/idb.

² LIMRA (June 12, 2025). Life Insurers Council: Final expense insurance new annualized premium increased 16% in 2024. Retrieved October 29, 2025, from https://www.limra.com/en/newsroom/news-releases/2025/life-insurers-council-final-expense-insurance-new-annualized-premium-increased-16-in-2024/.