2021 Focus Series: The New Annuity (Re)insurer Landscape
Since the economic crisis, primary annuity insurers have faced diminishing spreads on their investment portfolios. Those lower spreads reduce the profitability on blocks of fixed annuities and indexed annuities. In addition to lower spreads, fixed and indexed annuity reserve needs strengthened as interest rates decrease adding further pressure on profitability. At the same time, the cost of hedging variable annuities increased due to market volatility remains and lower interest rates. The combination of these factors led many primary annuity insurers to seek ways to de-risk the interest risks within their annuity portfolios or exit the annuity market.
Annuity Reinsurance Overview
- A Clear Preference in the Type of Reinsurance
- A Brief Explanation of Coinsurance, ModCo, and Funds Withheld Reinsurance
- Annuity Reinsurance Usage in Action: American Life & Security Corporation
Structuring Annuity Reinsurance Transactions
- Equitable Holdings–Venerable Variable Annuity Partial ModCo
- Auto Owner Life—Oceanview Fixed Annuity Funds Withheld Coinsurance
The Offshore Appeal for New Annuity Reinsurers
- Bermuda’s Deep Reinsurance History
- Bermuda ECR Equivalency to NAIC RBC and Solvency II
- Segregated Account Company Reinsurers Reduce Capital Requirement
Sorting the New Annuity Reinsurance Landscape
- Types of Reinsurers
- Pure Reinsurers
- Run-off Reinsurers
New Annuity Reinsurance Concluding Observations
- Reinsurance: Athene—Jackson National
- Divestment: Great American sale of GALIC to Mass Mutual
The first edition of this series identified the reasons new annuity reinsurers have emerged since the financial crisis of 2008. To recap, the need for primary annuity insurers to de-risk their business met the need of newly formed asset-manager backed insurers to increase their assets under management.
This report is the second in a four-part series that Conning will release in 2021 to examine the role of new parties entering this market and the shifting of the competitive landscape.