Conning Research: Individual Annuity Insurers Face a Challenging Strategic Landscape

The economic turmoil of 2008 has changed the strategic landscape for individual annuity insurers. Some observers see in this new landscape the potential demise of the variable annuity. A broader view may be that in times of turmoil, those companies that understand and adapt their business model to a new strategic landscape will find themselves better positioned for success, according to a new study by Conning Research and Consulting...

..."After the recession of 2000-2002 the individual annuity market consolidated, globalized and created product guarantees to respond to high-net worth clients' heightened concerns over principal protection for high-growth variable annuity products," said Stephan Christiansen, director of research at Conning. "The resulting heightened risk profile left insurers vulnerable to the current severe market downturn. After capital raising activities in 2008 by many of these insurers, they must now plot a course forward and deal with the new realities of the market. We believe that capital strengthening will and must continue, but also that insurers will need to rethink their product risk, distribution, asset management functions, and cost structures in this new, and likely consolidating, environment..."

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