OLDWICK, N.J.--(BUSINESS WIRE)--In this A.M.BestTV episode, Edward Kohlberg, associate director, A.M. Best, said that the Department of Labor's looming fiduciary rule changes have a role in the recent shifting of annuity sales. Click on http://www.ambest.com/v.asp?v=annuities1016 to view the entire program.
A.M. Best recently released a report that looks at the position of the variable annuity market, which states that variable annuity sales were down. The Best Special Report, titled, “Variable Annuity Sales Decrease Amid Regulatory Changes,” can be viewed at http://www3.ambest.com/bestweek/purchase.asp?record_code=253525.
“Variable annuity sales were down about 18% in the first quarter of 2016 and then down further in the second quarter of 2016,” said Kohlberg. “Companies have looked to de-risk their product portfolios, and they've lessened the guarantees on variable annuities, which have lowered sales amounts in the last few years.”
Kohlberg highlighted that this downturn was tied more to the Department of Labor's fiduciary rule changes, which will include additional fee disclosures and more level compensation structures, as well as the increased volatility in equity markets. “Consequently, policyholders are looking for more stable returns from fixed and equity index products,” said Kohlberg. “For that reason, fixed-indexed annuities had the largest growth in the annuity market, which offset the decreases in variable annuities.”
Since full implementation of the Department of Labor's rules do not go into effect until 2018, companies still have some time to revise their product mix or design. Kohlberg noted that companies are doing this by examining their product portfolios and strategies to see if any revisions need to be made.
Recent episodes of A.M.BestTV include:
- London Calling: Distributors and Underwriters Pitch for U.S. Risks: Brokers and underwriters at the second annual CHART-Exchange Constitutional Convention, court one another with the goal of placing coverages—including some that traditionally have remained within North American markets—with the London market: http://www.ambest.com/v.asp?v=chartexchange1016nc.
- Small Captives Poised for Higher Limits, Greater Scrutiny: Attendees at the Delaware Captive Insurance Association's Fall Forum said captive managers and sponsors are busy preparing for new tax rules that will allow sponsors to place more premium in 831(b) captives. However, those captives also must meet risk diversification and ownership standards: http://www.ambest.com/v.asp?v=dcia916nc.
- Mutual Insurers' Formula for Future Success: Be Your Policyholder: Insurers at the National Association of Mutual Insurance Companies convention said relevancy will not become an issue if mutuals stay abreast of competitors and remain true to their business model: http://www.ambest.com/v.asp?v=namic3916nc.
- Surplus Lines Insurers See Opportunity in Private Flood Coverage: Attendees at the National Association of Professional Surplus Lines Offices conference said a bill that has cleared the House of Representatives would enable surplus lines writers to offer coverage to consumers with unique and complex flood risks: http://www.ambest.com/v.asp?v=napslo2916nc.
A.M.BestTV covers exclusive A.M. Best information and reports, targeted topics and key developments in the (re)insurance industry every Monday, Wednesday and Friday. Sign up for alerts of episodes at http://www.ambest.com/multimedia/ambtvsignup.html. View A.M.BestTV episodes at http://www.ambest.tv.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2016 by A.M. Best Company, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.