* 68 pct of insurer CFOs expect years of low rates
* Almost all see even chance of economic shock soon
* Survey comes on eve of latest Fed action
June 20 (Reuters) - More than two-thirds of chief financial officers at North American life insurers expect interest rates to remain depressed for at least three years, according to the results of an industry survey, a bad omen for a sector already struggling with historically low returns.
The news comes just hours before the U.S. Federal Reserve announces its latest policy moves, which some think could include the renewal of efforts to keep long-term interest rates low.
Life insurers are extremely dependent on the interest rate environment, as they require healthy rates of return on the premiums they collect now in order to pay claims and benefits in the future. With rates at historic lows, actuaries and consultants say life insurers' business models are threatened.
Towers Watson surveyed CFOs of 30 life insurers and found 68 percent expect a three-to-five-year stretch of low rates, followed by a gradual rise, the consultancy said in a report on Wednesday.
One lingering question within the industry, though, is how seriously some insurers are taking the prospect of persistently low rates and whether companies are adjusting their product mix and guarantees to cope.
"You can kid yourself, unfortunately, a long time in our industry," AIG's Jay Wintrob said at a Standard & Poor's insurance conference earlier this month.
Towers Watson found that nearly three in five companies had established limits on the interest rate risks they were willing to take -- but 40 percent of them have already breached those limits anyway.
Respondents were also pessimistic about the economy as a whole, with 87 percent saying there was at least an even chance of a major economic disruption by the end of 2013.
"Insurers need a forward-looking plan for managing the enterprise if interest rates stay low for an extended period of time. They also need a risk management plan for a sharply rising interest rate scenario," John Fenton, the senior life insurance consultant for Towers Watson, said in a statement.
"Based on the survey, many life insurance companies do not appear to be well prepared for either scenario."