Will the Fed rate cut help ease pressure on insurers’ underwriting profits?

The impact: The Federal Reserve’s half-point cut to its benchmark interest rate—which surprised many experts expecting a quarter-point cut—will likely have mixed effects on the profitability of the insurance industry over the next few months.

• Historically, the sector does better when interest rates are rising.
• The Fed’s September cut is expected to be the first in a series of reductions through the remainder of the year and into 2025.

Why it’s important: Because insurers are constantly receiving premiums, they’re always investing new money. So rate changes in either direction may affect their operations, as interest rate risk plays a big part in determining their profitability.