Economists are forecasting multiple benchmark interest rate hikes by the Fed this year, given 40-year high inflation rates currently. The anticipated increase in interest rates bodes well for financial institutions like insurance companies because they will help these companies generate better revenues.
Higher bond yields increase risk-free returns, thus benefiting insurance companies, which invest in high-grade fixed-income instruments to meet their promised returns to policyholders. Investors’ interest in the insurance stocks is evidenced by the SPDR S&P Insurance ETF’s (KIE) 18.1% gains over the past year.
