Goldman Sachs Sees the Birth of New Types of Annuities
Some of the most innovative annuities coming out in the next year may not even be called annuities.
Goldman Sachs analysts have spotted shadows of new types of annuities, or annuity-like products, spawning.
The firm gives a glimpse of the children of today’s annuities in a summary of results from a survey of 138 annuity market players at 30 insurers.
About 32% of the players said their companies are developing a “next generation income solution,” and 31% ranked these solutions as an investment strategy they planned to prioritize.
The analysts did not say what the next generation of income solutions or investment strategies might look like, but they noted insurers’ hunger for “products that offer investors exposure to potential market upside coupled with downside protection.”
What It Means
Some of the most innovative annuities coming out in the next year may look a lot different. Some may not even be called annuities.
The Survey
Goldman Sachs has been conducting annuity player surveys for three years, to support efforts to sell asset management and other services to insurers.
Today, the participants’ main focus is on building out menus of non-variable indexed annuities, or products based on a design that’s 28 years old, and registered index-linked annuities. The RILA, or variable indexed annuity, is 13 years old.
About 44% of the survey participants predicted that the continued rise of the RILA would be the most significant trend in the next year.
About 69% of the players said they were focusing on RILA product design, and 50% said they were focusing on non-variable indexed annuity design.
The Shape of Things to Come
Insurers have been struggling in recent years to create a market for contingent deferred annuities, or annuity income spigots that can be bolted onto any ordinary investment portfolio.
Bob MacDonald, the LifeUSA founder, has talked about rebooting an old type of long-term savings product, the endowment.
Stone Ridge is working on efforts to “embed longevity pooling inside asset management strategies.”
The Goldman Sachs survey results suggest that 10 or more insurers could be working on comparable kinds of mystery products.
But Goldman Sachs separated contingent deferred annuities out from other types of next generation products in the survey questions. The firm asked explicitly about CDA development, and only 22% of the survey participants said they were focused on creating CDAs.
Credit: Nicky Loh/Goldman Sachs