Although most US life and annuity insurance companies begin 2016 facing many of the same challenges present in 2015, there is a heightened sense of urgency for owners, shareholders and policyholders to ensure companies are not continually increasing risks, according to A.M. Best.

An A.M. Best report, Challenges Look Similar for U.S. Life & Annuity Industry But No Time for Complacency, has cited a number of factors that will continue to pose hurdles; chief among them are historically low interest rates, marginal to declining premium growth and regulatory uncertainly.

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However, the report noted that life and annuity companies are facing new challenges as well, including the aggregation of longevity exposure from increasing life expectancy trends, the rise of cyber risk as a life "catastrophic" event and increasing investment risk from traditional and non-traditional asset classes.

A.M. Best has maintained a stable outlook on the US life and annuity industry for 2016. The ratings agency said most insurers currently maintain ample levels of risk-based capital to absorb expected and unexpected shocks.

Improving results

It explained that the industry is characterized by improved underlying financial results, improved asset/liability management capabilities and modest product features with minimal signs of a renewed "arms race" among competitors.

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The report stated that 2016 is likely to bring further divergence in global economic conditions and financial markets, though the US. economy should continue to grow modestly, driven largely by domestic demand in contrast with many emerging and mature economies.

The year ahead is also expected to bring about change driven by evolving regulations, the potential for rising interest rates, increased leverage of new technologies, shifting consumer trends and other challenges.