Blurred lines between fixed and variable option
OLDWICK, N.J., November 5, 2015—This last in a series of “First Monday” episodes for November spotlights a discussion with A.M. Best Assistant Vice President Rosemarie Mirabella and Financial Analyst Frank Walko, who talk about how evolving fixed- indexed annuity (FIA) product designs are blurring the lines of distinction between FIAs and variable annuities.
“First Monday” is A.M. Best’s monthly program featuring commentary by the company’s leading analysts.
Recently, A.M. Best completed a survey that was conducted with the top 10 FIA writers, which represents roughly 70% of the overall market. Mirabella and Walko addressed some of the highlights of that survey.
Click here to view AM Best TV programs.
A growing fixed annuity market
“The fixed annuity market is a growing and increasingly more popular market of the annuity market. Sales levels are almost about $50 billion on an annual basis, with a sort of blurring of the lines of distinction between the fixed annuity and the variable annuity markets,” said Mirabella.
“The FIAs are usually based off of some form of index. Today, there is an increasingly amount of volatility controlled or proprietary indices, and the challenge with the volatility and blended indices is that they are relatively more complex and often misunderstood by policyholders,” said Walko.
Additionally, the survey showed that there is much variation amongst carrier to carrier in terms of minimum and maximum income benefits, sometimes as much as two times over a 20-year waiting period. However, the degree of variation is somewhat dependent on when the policyholder can elect the income benefit.
Recent episodes of A.M.BestTV include:
- European Insurance Markets Ripe for Innovation: A.M. Best Managing Director, Analytics Greg Carter discusses the top issues in the European insurance markets, including technology, product design and regulation.
- Insurers Urged to Stay Ahead of Market Disruptors: A.M. Best Chief Rating Officer Stefan Holzberger and Managing Senior Financial Analyst Greg Reisner discuss emerging opportunities created by disruptive market forces,
such as cyber liability.
- Skyrocketing Cyber Business Catches Insurers’ Attention: At the PCIAA conference in Hollywood, FL, insurance leaders said premiums from cyber insurance could quadruple in four years, which has insurers, brokers and
reinsurers focusing on coverage.
- Insurers Adjust to the Expanding Role of Regulation: At the PCIAA conference in Hollywood, FL, insurance leaders said regulations have taken more of their attention, including regulations that impose banking-type restrictions on insurers.
A.M.BestTV covers exclusive A.M. Best information and reports, targeted topics and key developments in the (re)insurance industry every Monday, Wednesday and Friday. Sign up for alerts of episodes at http://www.ambest.com/multimedia/ambtvsignup.html. View A.M.BestTV episodes at http://www.ambest.tv.
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.