A very good article from Darla Mercado at Investment News discusses the current challenges that insurers face in the fixed annuity market.
The challenges basically involve two issues:
- Interest rates--and particularly interest rate spreads--are very low. Low interest rate spreads make it difficult for insurance companies to earn income on fixed annuities since they are spread-based products.
- Increased regulatory requirements make it more difficult and expensive to sell fixed annuities--particularly through independent brokers. Suitability requirements at the point of sale make it difficult for insurers to manage the independent broker channel since it is so diffuse. Banks and broker-dealers are easier to manage because top-down controls can be imposed by the parent organization. In addition, the parent organization is able to assume more responsibility and liability since they are more resource rich than individuals.
The article can be read by clicking here.