For several years following the global financial crisis, annuity market dynamics remained relatively static, consisting of a fairly stable set of companies leading in product sales year over year, a relatively quiet merger and acquisition (M&A) scene, and most product development action aimed at de-risking and reducing product risk profiles.
In the last 12 to 18 months, however, significant catalysts for change have come forth, shaking up the market. New entrants have emerged and have taken market share, product rotations have commenced, sales leaderboards have been reshuffled and a spate of M&A activity has taken place.
At EY, we continuously monitor the product and solution landscape to help manufacturers and distributors keep abreast of the ever-shifting market, and we have identified the top five things to watch for in the annuity space, all serving as catalysts for market change.
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1. Private equity firm impact.
Private equity firms have made a significant splash in the annuity market over the last few years with a slew of major annuity block acquisitions.
Their entrance led to an almost immediate impact on the annuity space, with several of their branded products taking considerable market share away from established leaders, leveraging lesser regulatory compliance requirements and more aggressive investment portfolios. But going forward, private equity firms could face some headwinds in preserving competitive advantages.
The prospect of increased disclosure and capital requirements (on a case-by-case basis), as proposed by the New York Department of Financial Services, lingers. Competitors in the annuity space, already likely to have significant investment and capital markets discipline, should over time begin to narrow the gap on the performance of their general account portfolio and, subsequently, to increase the competitiveness of their products.
Nonetheless, despite the headwinds, we still expect private equity firms to continue as a major factor within the annuity market and to provide traditional annuity writers a continued competitive challenge.
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2. In-force block management.
3. Technology evolution expands beyond operations.
4. Continued product rotation away from variable annuities. 
5. Deferred income annuities. 
