More and more insurers are designing and offering “hybrid annuities” (also referred to as: structured annuities, structured-note annuities, structured variable annuities, structured indexed annuities, indexed variable annuities, and variable annuity/fixed indexed annuity hybrids).
These products provide consumers with higher index-linked upside potential – relative to traditional fixed indexed annuities (FIA) – in exchange for sharing some downside return risk.
This innovation was first introduced in late 2010. By the end of 2013, the current market leader had garnered more than $3 BN in cumulative sales. Other entrants are starting to gain significant traction. For instance, in the fourth quarter of 2013, a second carrier reported sales between $200 MM and $300 MM, while another reported $90 MM.
In this article we address the following questions:
- What is the consumer appeal of hybrid annuities?
- What are key design and pricing considerations?
- What is the future outlook for these products?
