Variable annuities were introduced to Asia in the late 1990’s and have been popular ever since. American growth of variable annuities peaked in 2007 before the financial crisis took it down to lower levels. According to Insurance News Net’s “After financial crisis, Asia emerges as variable annuity growth area,” there is a still a lot of growth potential in Asia even as the American markets are increasing again. Rebecca Ng of A.M. Best Company wrote this article about the potential for variable annuity growth in Asia and says that China looks to be the top spot for this growth.
China’s Insurance Regulatory Commission has piloted a program for variable annuities that gives insurers great opportunities in the business. The potential for a 100% return with variable annuities makes them very popular with policyholders and a bit riskier for insurers. Chinese capital markets need to make sure they can hedge variable annuity products, especially some of the guarantees offered to policyholders. McKinsey & Co consultants believe that insurers will be able to do this with proper hedging, reinsurance, and continuous improvement with product design.
After a few years of decreasing in North American sales, variable annuities have seen double digit growth and the amount of assets under management has passed the high in 2007 again. In 1999, variable annuities were introduced in Japan and sales grew fast almost immediately. Introductions followed in other areas of Asia. While the financial crisis did take some insurers out of the variable annuity market in Asia, there has been a renewed interest in China especially after the pilot program from the CIRC. Variable annuities are making a global comeback after a rough few years.