Investors and advisors weren’t the only ones affected by events in the financial markets last year. Insurers that sell variable annuities (VAs) also were forced to contend with the volatile equity and credit markets. Kevin Loffredi, senior vice president with Advanced Sales Corporation, publishers of the “Annuity Intelligence Report,” points to several recent and ongoing changes in VAs.
As a general overview, VA benefits over the summer of 2008 underwent rapid change, says Loffredi, when VA providers were one-upping each other with step-up provisions, withdrawal rates and other features. Starting in late-fall of 2008 up until now, however, carriers began pulling back some of their more recent enhancements.
“The pace of changes has been hot and heavy since December and we expect this to continue up through the May ’09 prospectus filing season,” says Loffredi.
To put it into perspective, though, Loffredi notes the recent changes have been nothing like those seen early in the decade. In 2002, he recalls, there saw a mass exodus of guaranteed monthly income benefits (GMIB), and GMIBs from roughly a dozen carriers were cancelled. In contrast, the current changes are more of a scaling back. “Right now, perhaps carriers have realized they might have made the benefits too rich and realize market share at any cost does not work,” he explains..