AM Best TV

As Fixed-Indexed Annuity Market Grows, So Does Risk Profile

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.


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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.

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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

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