Study shows variable annuity hedging programs 94 percent effective

Between November and March, hedging programs at variable annuity providers maintained a high level of effectiveness – 94 percent compared to 93 percent in the prior period, according to a new study from independent actuarial and consulting firm Milliman.

“The success of hedging programs has caused companies to look more closely at their unhedged risk and to determine how to use hedging to better manage those risks,” says Ken Mungan, who heads Milliman’s financial risk management practice. “Many companies have explored and implemented refinement and expansion to their financial risk management programs based on the success of the hedges in place and also based on companies’ experience in the last year with their unhedged business.”