Additionally, 87% of CFOs believe the likelihood of a major disruption to the economy in the next 12 to 18 months is 50% or greater. More than a quarter of respondents (27%) say the likelihood is 75%; and 7% believe the likelihood of a major disruption is almost certain.

More than two-thirds (68%) of CFOs say they expect a three- to five-year period of low interest rates, followed by a gradual increase, the report finds. When asked to consider their organization's interest rate risk exposure, CFOs' metrics of greatest concern were their levels of statutory capital (63%), followed by their level of statutory earnings (53%).

“Life insurers are adversely affected by low interest rates, in part because of lower returns on their investments and previous guarantees promised to their policyholders,” says John Fenton, a senior life insurance consultant at Towers Watson. “In addition, the low interest rate environment makes some of their products—such as traditional fixed universal life and annuities—very unattractive in the marketplace.”

To counteract the low interest rates, more than half (57%) of CFOs say their company has established risk tolerance limits for interest rate risk. But 43% have not done so, and more than 40% of CFOs with established rate risk tolerance limits indicate they have breached them.

“This raises serious questions about how these companies are dealing with interest rate risk management,” says Karen Wells, senior investment consultant at Towers Watson. “Most companies have a critical need to revisit their interest rate risk strategy in light of the current economic environment.”

The survey finds that CFOs have increased the cost of insurance rates for interest-sensitive products to better manage their interest rate risk. Forty-three percent of respondents say that, based on future expectations, the language of their policy forms allows them to change cost of insurance (COI) rates under the universal life products they sell based on investment earnings, while 50% say they can change COI rates for variations in mortality alone.

In the past five years, just over a third of respondents have increased COI rates, expense loads or both on at least some part of their life block, the report adds.

Nearly all respondents (96%) say they have reduced their minimum guarantee on fixed-account products. More than half (56%) have adjusted premium rates, reduced living benefit guarantees or adjusted fees on annuity products (56%). Or they have ceased or significantly curtailed sales of some products (54%). One-quarter have exited product segments, and another 13% plan to do so in the next six months, the survey finds.

Despite their unfavorable near-term outlook on the economy, CFOs are more optimistic about improvements in their financial results.

Seventy-one percent of respondents expect increases in new life and annuity premiums of 4% or more in the first quarter of 2012, compared to the same period in 2011.

More than 80% expect GAAP net revenue to grow by 4% or more in the first quarter, compared to the same period in 2011.

When compared to expectations from Towers Watson's last CFO survey, this represents a notable increase in optimism: When asked about expectations for the third quarter of 2011, only 43% predicted increases in new life and annuity premiums of 4% or more. And just 50% anticipated a GAAP net revenue increase of 4% or more.

Adding to the sense of optimism, 50% of respondents predict GAAP net income will increase by 4% or more compared to the first quarter of last year, the survey reveals.