S&P analysts look at the US annuity market and see cannibals
What do you want to know
- Issuers of life, health and annuity insurance are doing well, despite the COVID-19 pandemic and very low interest rates.
- Life insurers may struggle to repeat last year’s strong increases in annuity sales, S&P’s Heena Abhyankar said.
- She expects RILAs to eat up the market share of indexed non-variable annuities as well as traditional variable annuities.
Rating analysts at S&P Global Ratings predict that sales of registered index-linked annuities, or RILAs, will continue to grow — crowding out sales of fixed annuities, non-variable indexed annuities and traditional variable annuities.
Analysts discussed the competition between annuities and annuities at a web meeting S&P held on Thursday to discuss hot topics in global insurance markets.
S&P analysts have concluded that the life, health and annuity issuers they rate are doing well, despite the effects of the COVID-19 pandemic and very low interest rates.
“Most companies enter 2022 on relatively solid footing,” said Heena Abhyankar, director of S&P who is a senior analyst for the U.S. life insurance market.
What your peers are reading
Funding levels are high, all investment issues are manageable, the current level of pandemic-related life insurance claims has been manageable and sales growth in 2021 was misguided, Abhyankar said.
The annuity market
One cloud, Abhyankar said, is that life insurers may struggle to repeat the strong annuity sales gains they saw in 2021.
Abhyankar and other S&P analysts suggest in a life insurance industry report released earlier this week that annuity sales have fluctuated around $230 billion a year over the past decade, “the growth in sales of one cash product being at the expense of the contraction of another”. ”
The number of people approaching retirement age is growing, but low credit rates can be a barrier, and many people may simply lack the savings they need to pay annuities, analysts conclude in the report.
RILA vs other annuities
RILAs are variable annuities, which means that an issuer of RILAs may expose the holder to the risk of loss of principal.