Significant Trends; New Developments Create Favorable Market Environment for Annuities in 2015
WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today released its “State of the Insured Retirement Industry: 2014 Review and 2015 Outlook” report identifying marketplace opportunities ahead in 2015. Despite some macroeconomic challenges during the past year, the insured retirement industry is financially sound and in a strong position to expand its share of the retirement market as continually shifting demographics lead to increased consumer demand.
“Fixed indexed annuities and immediate and deferred income annuities are showing especially strong growth as the industry is poised to begin 2015 in a strong financial position and with favorable public policy support,” said Cathy Weatherford, IRI President and CEO. “IRI’s 2014 research reveals the need for income planning advice and guaranteed retirement income solutions that are tailored to meet consumers’ demand. As Americans become more aware of their retirement income needs, the industry is presented with the tremendous marketplace opportunity to innovate and develop new products to match the increasing demand for insured retirement products.”
The State of the Industry report highlights include:
- A December 2014 Moody’s Investor Service report found that the industry as a whole has a strong operating company liquidity, with liquidity resources on average of 2.6 times its needs compared to approximately double its needs in 2008.
- Industry-wide annuity sales are on track to increase three to five percent in 2014, reaching or exceeding $225 billion, the highest level since 2011.
- Third quarter variable annuity assets were 179 percent higher than their post-crisis low point of $1.07 trillion in the first quarter of 2009, and two percent higher than the end of 2013.
- New product developments are meeting consumer needs by providing limited downside protection, higher payout rates than traditional benefits, and increased flexibility of income start dates.
- Deferred Income Annuity (DIA) sales have more than doubled to $2.2 billion in 2013 and will likely exceed that level in 2014. The number of companies offering DIAs has also doubled since the start of 2012.
On the public policy front, many market opportunities are emerging around Deferred Income Annuities (DIAs) in light of the Treasury’s Qualifying Longevity Annuity Contract (QLAC) rule. The Treasury Department adopted the new QLAC rule to improve accessibility and usability of DIAs in qualified retirement plans, including individual retirement accounts. Under the new rule, the value of longevity annuities that meet the conditions specified in the rule will be excluded from the account balance used to determine required minimum distributions. Near the end of 2014, companies began announcing DIA products modified or designed for use in conjunction with QLAC.
The entire report, “State of the Insured Retirement Industry: 2014 Review and 2015 Outlook,” is available HERE.
About the Insured Retirement Institute: The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of more than 30 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at www.irionline.org.