A.M. BestTV: Fiduciary Rule Impacting Variable Annuities, Says A.M. Best Analyst

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FOR IMMEDIATE RELEASE

OLDWICK - OCTOBER 10, 2016 02:03 PM (EDT)
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.

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