Traditional Variable Annuities Join the Sales Party

A variable annuity can tie part or all of the contract’s crediting rate to the performance of funds that resemble mutual funds.

A RILA contract can tie part or all of the crediting rate to the performance of investment indexes. Issuers can usually reduce their exposure to investment risk by buying options or other hedging instruments designed to moderate the ups and downs of the indexes used in the RILA index menus.

Because RILAs tend to be relatively easy to administer and hedge, many insurers now prefer writing them to writing traditional variable annuities.

Issuers and regulators have typically classified RILAs as variable annuities and distinguished between RILAs and traditional variable annuities.

That could change. The U.S. Securities and Exchange Commission appeared to distinguish between RILAs and variable annuities in a recent batch of RILA registration regulations.

Sales details: Here are the Wink survey results by product type, reflecting changes between the latest quarter and the second quarter of 2023:

• RILAs: $16 billion (Up 45%)
• Multi-year guaranteed annuities: $41 billion (Up 35%)
• Non-variable indexed annuities: $32 billion (Up 28%)
• Traditional variable annuities: $15 billion (Up 20%)
• Traditional fixed annuities: $507 million (Up 0.7%)

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