With 2013 off and running, we at the Insured Retirement Institute (IRI) have compiled a comprehensive outlook for the insured retirement industry covering all aspects of the business — from public policy to product changes to the financial health of the industry itself. IRI forecasts that many of the trends and dynamics that marked 2012 will continue in 2013, including financially sound insurers, ongoing innovation, and increasing consumer demand for retirement income driven by demographic factors. Here’s a snapshot of our outlook with 10 things to look for in 2013.
1. Strong balance sheets, capital and liquidity
Much has been written about record low interest rates, yet less attention has been focused on the strong balance sheet fundamentals across the industry. Rating agencies and analysts continue to report that the industry is in a financially stable position and continue to note insurers’ solid capital and liquidity positions. We expect this sound bill of health to endure throughout 2013.
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2. Private-equity firms entering the annuity business
While some companies slowed down or eliminated new annuity sales in 2012, there was an influx of private-equity firms entering the annuity market, specifically by purchasing interests in fixed-indexed companies as well as variable annuity blocks. Their presence in the market should help to support industry-wide sales in 2013.
Product and distribution innovation
3. More innovation and growth awaiting DIAs
Deferred income annuities (DIAs) experienced their first year of significant sales in 2012 roughly $1 billion and there’s no sign of slowing down. Sometimes referred to as “longevity insurance,” DIAs are a form of fixed annuity that allows the owner to defer the start of the guaranteed income stream until a later date. We anticipate that innovations and new offerings in this class will contribute to DIAs becoming the fastest growing product in 2013 on a percentage basis.
4. Innovation in distribution as FIAs and SPIAs expand into non-traditional sales channels
For fixed-indexed annuities (FIAs) and single premium immediate annuities (SPIAs), ongoing innovation has been taking place on the distribution side of the business, with both product classes expanding into non-traditional sales channels in 2012. Look for this expansion into outside distribution channels to continue during 2013.
5. New products without a living benefit
Within the variable annuity market, while living benefit elections during the past few years have reached about 90 percent, many companies are aggressively developing new products without a living benefit to cater to consumers interested only in tax deferral or diversifying into different asset classes. Expect companies to continue to innovate in 2013 and bring to market new products to offer consumers a wide array of solutions to meet their individual needs.