The demand for fixed-income annuities has increased as the volume of variable annuity purchases has decreased. However, in a recent Bloomberg BNA article, Milliman’s Noel Abkemeier discusses the negative affects the recession has left on variable annuity products.
Here is an excerpt:
“During the Great Recession, the cost of hedging the living benefits became very expensive,” which forced the insurance industry to deploy various de-risking measures to try to stabilize the variable annuity business, said Noel Abkemeier, a consulting actuary and principal at Milliman in Chicago.
Insurance companies instituted a number of investment changes and other measures “to control the cost of the living benefit to the customer and, secondly, to limit their own risk,” Abkemeier said during a session on trends in annuity products at the Insured Retirement Institute’s Government, Legal and Regulatory Conference.
Unlike variable annuity sales, purchases of indexed annuities increased slowly but steadily during the same 2007-2012 period, Abkemeier said. “They were maybe the product for the time,” because they were less vulnerable to the fluctuation in interest rates that hurt fixed-income and variable-rate annuities, he said.
For more Milliman perspective on variable annuities, click here.