Indexed Variable Annuities - Evolving Product Designs in the Annuity Market
With fixed indexed annuity sales hitting record levels, insurers are responding to demand by merging the best features of FIA (fixed indexed annuity) and VA (variable annuity) products to create a new range of hybrid designs. Referred to as “indexed variable annuities,” “structured note annuities,” or simply FIA/VA hybrids, these products combine indexed-linked crediting strategies with VA funds, creating an attractive solution for consumers looking to boost their retirement income.
Echoing developments in the variable annuity market, insurers are also offering guaranteed living benefit riders on fixed indexed annuity policies, as well as linking crediting strategies to managed volatility indices to produce so called “uncapped annuities.”
On Wednesday, June 25th featured speaker Alex Marion, Vice President of Product Management at Numerix, reviewed the new IVA product designs and discussed best practices for the risk management, and the hedging and reserving of these products.
These developments are proving popular to consumers; however, innovation seems to have outpaced regulatory guidelines. In addition to new hedging challenges for risk managers, the issue or reserving has become a pressing concern for insurers and regulators. While existing guidelines AG33 and AG35 prescribe statutory reserves for FIAs, the National Association of Insurance Commissioners (NAIC) is reviewing methodology as part of principle-based reserving (PBR).
Mr. Marion covered:
- FIA market trends
- FIA / VA hybrid product designs
- Uncapped annuities
- Risk management of guaranteed living benefit (GLB) riders
- Statutory reserving challenges
Featured Speakers
Alex Marion
Alex Marion heads up insurance solutions for the Numerix Client Services group as VP of Product Management. In this role he works with clients developing comprehensive risk management solutions, leveraging powerful analytics and actuarial expertise. Mr. Marion and his team of actuaries and financial engineers provide solutions in dynamic hedging, economic scenario generation, asset liability management, nested stochastics, counterparty risk, and regulatory compliance.
Prior to joining Numerix, Mr. Marion served as a quantitative analyst for Phoenix Wealth Management where he developed a risk-neutral economic scenario generator with applications in VA and EIA dynamic hedging. Before Phoenix, Mr. Marion was a consultant with Milliman’s Financial Risk Management practice where he managed dynamic hedging strategies for insurers.
As Chief Marketing Officer and Executive Vice President of Global Marketing & Corporate Communications, James leads the company’s global marketing and corporate communications efforts, spanning a diverse set of solutions and audiences. He oversees integrated marketing communications to clients in the largest global financial markets and to the Numerix partner network through the company's branding, electronic marketing, research, events, public relations, advertising and relationship marketing.
Since joining Numerix in 2008, James has launched the organization’s award-winning thought leadership program, bringing to light challenges and insights from Numerix market experts. He also hosts the Numerix Video Blog, tackling the challenges pressing the derivatives markets—from regulatory issues to trading strategies.
Prior to joining Numerix, James served as Managing Director of Global Marketing and Communications for Fitch Ratings. During his tenure at Fitch, he built the firm’s public relations program, oversaw investor relations and led marketing and communications plans for several acquisitions. Prior to Fitch, James was a member of the communications team at Moody's Investors Service.
