I am currently researching and am likely to purchase an indexed universal life insurance product.  This first-hand research and learning process has been interesting and is worth sharing.

In a nutshell, some of the key characteristics of indexed universal life insurance include:

Defined benefit pension plans are the traditional and increasingly rare type of pension plans offered through employers.

In contrast to defined contribution pension plans such as the 401(k), participants in defined benefit (“DB”) plans receive contractually guaranteed income and assume none of the risks (investment risk, interest rate risk, longevity risk, etc) associated with producing that lifetime income stream.

The problem is that defined benefit plans are scarce, and many of those that do still exist are in tough shape.

It is the afternoon (markets are closed) of August 9 2011, and millions of retail investors around the world must be asking themselves whether they can continue to stomach the gut-wrenching capital market volatility. 

The issue and questions about staying-power take on another dimension for those who are close to retirement or in retirement.  Retirement spending plans and the viability of retirement plans in general are brought into question. 

Anyone thinking about retirement income should pick-up a copy of Retirement Portfolios by Michael Zwecher.  This recommendation applies to both financial services professionals and consumers who are approaching or at retirement. 

Zwecher’s book is the definitive guide to constructing and maintaining portfolios that generate sustainable retirement income.  

A recent article in Bloomberg discusses the state of capital market solutions for the transfer of longevity risk.

The reality is that the longevity market is still in its infancy and there are a number of obstacles that are affecting its development.

One of the main hurdles involves the fact that longevity risk is very long-term in nature.  Securities that mature over the course of 20 years are not hugely appealing to hedge fund managers who are providing quarterly performance reports to their clients.

Risk Management Solutions (RMS) is well known as a leader in the area of catastrophe modeling and analytics.  The company provides its services to a broad range of insurers, reinsurers, consultants and capital markets participants who are active in the property and casualty insurance industry.

Genworth Financial is discontinuing sales of its variable annuity products.  The company plans to stop the sale of any new variable annuity products by the end of the first quarter of 2011.

Genworth has had an active presence in the variable annuity market as a top 20 U.S. company with $2.3 billion in sales in 2008.

The Japanese annuity market is an interesting case study.

Japan's combination of challenging economics and demographics could be a harbinger for how other developed countries react to longevity risk and capital market risk.

Similar to most other developed countries, Japan is demographically challenged with a rapidly aging population and relatively low fertility rates.

The fear index seems to be signaling that all is well.

The Chicago Board Options Exchange volatility index (“VIX”) represents the short-term (30 days) implied volatility of a S&P 500 option.  The VIX—also known as the fear index—has returned to pre-financial crisis levels.

The last time the VIX was at this level was last April—right before the index surged as a result of the flash crash and sovereign debt rumblings.  Before that, comparably low levels date back to pre-financial crisis 2007.

Annuity persistency refers to whether people hold on to their existing annuity products or exchange them--typically through a Section 1035 exchange--for new products.

Higher levels of persistency suggest that annuity owners are sticking with existing products which are likely more valuable than what would be available in the current market through an exchange.