FIAs, especially as insurers continue to develop and enhance them, are seen as providing advantages in almost any market environment. If interest rates rise, for instance, insurers can raise crediting rates; if rates are low, clients can focus more on index strategies, knowing they have downside protection.
While the Department of Labor's Conflict of Interest Rule pushed down total annuity industry sales during 2017, it looks as if the rule's delayed implementation and later repeal has done the opposite, as FIAs and VAs in particular are experiencing a sales recovery. Still, insurers will need to keep an eye on actions by individual states in days to come.
"Indexed and structured annuities will likely fuel overall annuity industry sales growth over the coming years, although a rebound to the record years of 2007 and 2008 is unlikely to come any time soon," Donnie Ethier, director at Cerulli, said in the report.
Ethier added, "As already seen to an extent in 2018, rising interest rates will add to the value proposition of traditional fixed annuities and income annuities. Any market downturn would also help FIAs continue to outpace VA sales."
Cerulli predicts more balance among the major product types in annuity sales over the next five years, he pointed out, adding, "Indexed annuity sales are expected to grow steadily and outpace traditional VA sales by 2021. Although a few VA carriers have increased the attractiveness of their optional guarantees, Cerulli does not see the sales trend reversing unless a greater number of VAs follow."
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