Evaluations for risk control indices to support more effective and informed selection in index-linked annuities
NEW YORK–(BUSINESS WIRE)–The Index Standard, the leading provider of index rating and forecasting services to the fund and insurance industries, today announced coverage of the full range of standard and risk control indices used in fixed index annuities products (FIAs) and registered index-linked annuities (RILAs). This focus area is the first of its kind and will include easily accessible ratings for the 150 indices used in the FIA and RILA markets, as well as benchmarks underlying selected exchange traded funds (ETFs) also deployed in the space, providing advisors and agents greater transparency and comparability into these complex products.
Index-linked insurance products continue to grow in popularity with over $23 billion in sales in the first quarter of 2021 alone. RILAs are also expected to be a strong growth area for the industry. In recent years, index-linked annuities have widened their sophistication; however investors continue to allocate approximately 40 percent to traditional benchmarks like the S&P 500. This creates concentration risk in portfolios and, with historically high valuations, can prove suboptimal for many annuities buyers over time.
“The Index Standard’s ratings decode and demystify risk control indices, so that end-clients can build a balanced and diversified portfolio that is most suitable for their investment goals,” said Laurence Black, founder and CEO of The Index Standard.
Supporting More Effective & Informed Selection
Using proprietary methodology and an evaluation process incorporating seven different criteria including expected future returns, efficiency, returns and capital at risk, The Index Standard’s newly available ratings will help contextualize and encourage the selection of more sophisticated risk control indices within FIAs. This will provide investors with access to a wide variety of asset classes and factors while maintaining institutional-quality governance and the ability to provide better returns over a longer time horizon.
As an extension to the rating and forecast of ETFs, FIA products are the first sector focus for The Index Standard, which leverages its senior team’s 40 years of experience in index construction and design. Via its subscription service, the company plans to launch additional evaluation for other index-linked insurance products in support of the its mission to educate, inform and support decision making for both product users and their advisors.
“Fixed index annuities were a natural market for The Index Standard, as they are simultaneously gaining a larger foothold while their complexities—and the mechanics of the indices they rely upon—are still largely misunderstood,” explained Black. “With the expectation that fiduciary and best interest regulations will be strengthened, the ratings can also assist in substantiating advisors’ recommendations in these areas.”
For more on The Index Standard’s work with index-linked annuities and these products’ role in retirement investing, see a recent conversation with That Annuity Show here.
About The Index Standard
Founded in 2020 by Laurence Black and backed by leading executives and academics serving the index community, The Index Standard brings unrivalled expertise and a startup mentality to the independent evaluation of indices, providing accessibility, transparency, and actionable insights into the $15 trillion index industry. With a strong focus on risk control indices and other sophisticated benchmarks used to build annuities, structured products and thematic exchange traded funds (ETFs), The Index Standard’s advocacy for “approachable finance” provides needed clarity and context in support of the development of new financial product innovation, and its successful implementation by investors and their advisors.
More on The Index Standard, its mission and example ratings can be found here.