The Clash of Giants: Swiss Re Predicts Higher Indexed Annuity Sales

The battle between traditional annuity issuers and private equity firms is heating up, with Swiss Re Institute analysts predicting that this clash of the giants will drive indexed annuity sales higher. Private equity firms have been putting pressure on the U.S. individual annuity market, leading to an increase in the supply of registered index-linked annuities.

In response, traditional annuity issuers have been strengthening their positions by forming captive insurers and sidecars to compete against the private equity-backed newcomers. This competition is expected to fuel the expansion of the registered index-linked annuity (RILA) market, without much impact on traditional fixed annuity sales or a revival in the traditional variable annuity market.

The increase in interest rates that began in 2022 has boosted U.S. individual fixed annuity sales, but the Swiss Re Institute analysts believe that this trend is likely to plateau. Instead, they predict steady growth in products that combine fixed and variable aspects.

Private equity firms have been investing heavily in the life and annuity market since 2009, acquiring about $1 trillion in assets globally and owning approximately 25% of U.S. individual annuity liabilities. This has created friction between private equity players and traditional issuers, as they both navigate a world where U.S. retirement savers face a savings shortfall of about $45 trillion.

Despite the competition and search for new growth opportunities, the analysts do not expect companies to reintroduce products that performed poorly during the low-interest-rate era. Instead, they anticipate a continued focus on RILAs and a cautious approach to assuming more risk in variable annuity lines.

Overall, the clash of the giants in the annuity market is expected to reshape the industry landscape and provide clients with more options in the future.